What is forex trading? how does it differ from normal stock market trading?
March 9th, 2010 by admin
What is forex trading? how does it differ from normal stock market trading?
Are the risk and strategies different? Can forex be more profitable?
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forex means foreign exchange where currencies are being traded are called forex market. it is risky business purely dependent upon the political aspect of the country
if you are new you should avoid
well! risk are different.
mostly, forex has greater leverage.
and yes, it is different than stocks.
liquidity is huge.
You may have heard about Forex trading and seen many sites on the internet propagating this seemingly great investment opportunity. In fact, a lot of interest has been generated in this investment instrument. There are some organizations running TV commercials, offering this “Forex trading” as a sure fire system that is expected to bring windfall profits in an easy fashion to the individual investor; along-with the fine print of a disclaimer.
The exchange of currencies is said to be amongst the world’s oldest professions. As long as there are two sovereign states with their respective currencies, there would be a foreign exchange as a facilitator for trade in those currencies. Foreign exchange has been abbreviated to Forex and has been around as a trading platform for centuries; with a present day daily turnover of US$ 1.90 trillion.
Essentially it is a global marketplace with no physical exchange building where all claims on foreign currencies are settled, between governments, corporations, investors and speculators amongst the other participants in the Forex markets.
Before venturing into Forex trading, the investor would be well advised to find a teacher or mentor. This mentor is expected to firstly explain the theory behind Forex trading; then guide the investor through sample trades using pen and paper; and finally guide the investor through Forex trading in real time using real money. Further, the investor would be able to draw upon the mentor’s experiences and avoid the common errors he may have otherwise committed.
Forex trading in itself is safe if the investors were to be realistic in their expectations and have done their initial preparation. The investors would realize that it is hard work and can provide a profession or a source of income to them. However, the investors must be on their guard against scamsters like in any other business.
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Akash
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Forex is currency trading. Trading it has many basic concepts of stock trading. After about five years of trading stocks, using Technical Analysis, you may want to look at it. FX (Forex) is much more risky that trading stocks… even more risky than penny stocks. Also, the FX market is less regulated…. so the chance of being ripped off is higher…. even by some of the brokers.
96% of people that try FX trading fail miserably in the first 6 months. Many of those are gone after the first month or two.
Watch out for adds that suggest you too can make big money!
Robots & “EA’s” work well only for some of the already very successful traders.
“Paper Trading” results shouldn’t be used as a way to judge performance with real money, with real market conditions.
Hello Richard,
Well Forex trading, is the simultaneous buying of one currency and selling of another at current prices. For example, buying Gbp/Usd means buying the pound and at the same time selling the dollar, a very simple concept indeed. Currencies as the above are traded in pairs mainly on the interbank (banks) and retail (private traders) market.
Common terms used:
- FX trading
- spot forex
The four major currencies are the Eur/Usd, Gbp/Usd, Usd/Jpy and Usd/Chf. You can easily find your trade among one of those currencies day in day out.
Here are the main differences:
- Market Performance. More volatility in the Currency market making market very liquid
- Low Transaction costs
- Market Transparency
- Trending Market
- No uptick rule
- No bear Market (when one currency goes down the other one is appreciating in value)
Also the leverage in forex is much higher and you need a very small start up capital to get a feel of the currency market. Stock market many a times has a major effect on some currency pairs such as USD and JPY. Using the data of some major stock can to some extent predict the moves in the USD and YEN pairs.
The strategies are the same in many cases. However due to the high liquidity and volatility of the currency pair, you will get far more action in the forex market than the stock market.
I hope that helps if you need any more info you may have a look at the following website http://www.forex-trading-domain.com
Best of luck
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