Day Trading FOREX or Forex market is good for people who want to make income trading currencies. In case you are accustomed to trading on a stock market or on features exchange, you know that you usually trade papers representing companies on stock market. In this case, you also trade papers that represent the whole countries.
You will be trading what is called currency pairs. Those are two currencies of different countries paired to one another. EUR / USD, USD / CAD and USD / JPY are among the more popular ones. When you buy EURUSD currency pair, you sell your US dollars and buy Euros. When you close this position, you sell these Euros and buy US dollars back. Hopefully you will end up with more US dollars than when you started, but it will depend how the Euro will behave against the US dollar, so you will either gain some money or loose some money.
Currency Trading FOREX usually involves leveraging because prices of currencies do not change that much as stocks do. Without leveraging, you would have to have extremely large amounts of money on your live account in order to make a buck trading FOREX.
Usual leveraging in currency Trading FOREX is 100:1, 50:1 or 20:1. Less common is 200:1 because it makes your trading extremely risky.
Normally you use a computer and a special software to trade FOREX. One of the most popular programs for it today is called MetaTrader. A lot of large brokers will allow you to use the same software, same platform and same broker to trade FOREX, stock market and perhaps other markets at the same time if you want it.
Currency trading is commonly viewed as being riskier than regular stock trading, because stock is mostly dependant on the company performance, while currency is much more volatile since it depends on a huge number of factors in different countries of the world. However where there is higher risk, there is usually higher return, and high volatility will let you have bigger profits (and bigger losses of course if you are not careful).
To trade successfully, you will need a few additional things like a good trading system, which is just a very well defined set of rules for entry and exit conditions, a good, balanced money management system and balls of steel to trade currencies. This will allow you to have a lifestyle of your choice by just being a FOREX day trader.
Mail this post
Posted under Currency FOREX, Options, Stocks, Strategies
This post was written by LinkVineAuth on January 9, 2012
