Forex Market – Forex Trading for Winners
Let’s get straight to the point. Most people don’t get involved in Forex trading purely for the excitement of it, though there is plenty of excitement. Most people want to make money, and that’s perfectly fine. Many of the most respected people in society, such as Carlos Slim and Warren Buffet, started out as successful investors. Some investors have made billions upon billions while many more have made their millions by trading stocks, bonds, and currencies. Forex trading is only one form of investing but it can be one of the most lucrative if you play your cards right.
Forex trading involves the trading of currencies. A Forex trader exchanges one money for another, hoping that the money she traded away will drop while the money she bought will rise. ultimately the trader will exchange her money back into dollars or another money in hope that she produced a profit.
Usually currencies move an incremental paces. Because Forex markets are so enormous and liquid, which cash regularly exchanging hands, the market is comparatively stable when compared to stock markets. Most of the time a money will rise by only a few pips within a given day and pip itself is only 1/100th of a percent.
This raises an important question: investors make and lose money off of changes in the market so how then do Forex traders rake in all that money? There are two important factors, time and leverage. While the daily changes in a money may be small they can add up over time. Within a given year, for example, a money can rise and fall by meaningful rates, potentially 10 percent or more.
Another important point is leverage. Since Forex markets usually only move at incremental rates, edges and investing institutions are often willing to extend Forex traders a lot of leverage. Let’s say you have USD 1,000 dollars to invest in Forex. A thousand dollars isn’t a lot of money to invest, especially if the money is only going to rise by tiny fractions of a percent in a given day. If your USD 10,000 investment moves up 2 pips you’ll only earn 2 dollars. Of course if your investment drops by 2 pips you’ll only lose XXX dollars.
Due to the tiny changes and consequently low risk in the money many companies are willing to extend huge amounts of leverage, often up to 200:1. Now, if you invest USD 200,000 in Forex and it moves up 2 pips, you’ll earn 400 dollars. That’s a lot more money isn’t it?
Now add in the time factor. Let’s say your investment moves up 15 pips over the time of a month. Now off your USD 10,000 investment plus leverage, for USD 2,000,000, you’ll earn 3,000 dollars. As you can see the money is really starting to add up. Just imagine if you invested USD 50,000 dollars and it moves up by 15 pips?
The combination of time and leverage can make Forex trading a lucrative proposition for many investors. With careful research and closely monitoring world events you can make a lot of cash off your investments, however, if you don’t take it seriously you could also lose a lot of money.