Forex Currency Trading
January 16th, 2012
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If you want to generate extra earnings, one of several choices you could have is trading Foreign Exchange or currency Trading FOREX marketplace. On stock market you actually trade papers which represent corporations, and in Foreign exchange market you likewise trade papers that stand for entire 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. You do operations on FOREX like buying and selling. In FOREX trading jargon, when you are said to “buy EURUSD” pair, you will sell your US dollars and buy Euro at the current exchange rate as determined by your broker. When you are said to “close this position”, you will do the reverse, sell those Euros and buy back your US dollars. 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.
When you are currency trading on FOREX, or you just exchange money for travel to another country, you know that changes in the currency rate are really minimal throughout the day, that is why you need leveraging. Without leveraging, you would have to have extremely large amounts of money on your live account in order to make a buck trading FOREX.
Normally, broker will gladly (and automatically) extend a leverage to you when you are trading currency with them. Most common leverage is 100:1, sometimes 20:1 or 50:1. This really means that for each dollar you trade, broker adds 99, 19 or 49 respectively from his own money. Less common is 200:1 because it makes your trading extremely risky.
To trade currencies, you can use a regular trading platform such as 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 FOREX is considered to be more risky than stock trading due to a very high volatility of the currency pairs offered as instruments. 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).
With a good trading system, money management and well-defined rules you can safely make a buck to afford a lifestyle of your choice by trading currencies.
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