FOREX facts

FOREX TRADING

To start an online money making business of Forex trading you must know certain facts. I have already explained the outline and concept of this online business - i.e., what is FOREX, what is Forex trading, what is Forex market and how online Forex trading is done, in my earlier blog post.

As already explained, Forex trading has some similarity with stock trading business. But, online Forex trading has some unique difference.

The most important facts about Forex Trading are as follows

1. Forex market timing - Unlike the stock market, Forex market is open 24 hours a day, for five days a week. The reason behind this is, Forex trading  business is done globally. Forex traders deal globally with foreign currencies of different countries of different time zones, while stock trading is done through stock exchange of different countries. While Forex market reaches its closing time in US, it opens up in many different countries, except on weekends. So, for Forex traders it is an advantage, since they can perform the business at any time of their convenience, day or night.
2. Tracking profit opportunities - In stock trading, you will have to keep track of thousands of companies for buying and selling shares to make a profit. But in Forex trading, a trader will have to keep track of the prices of leading currencies of the world. The leading currencies are US Dollars (USD), Euro (EUR), Japanese Yen (JPY), Canadian Dollar (CAD), British Pound (GBP), Swiss Franc (CHD), New Zealand Dollar (NZD) and Australian Dollar (AUD). There are other currencies which are also traded, but most of the trading is done with the said currencies.
3. Documentation - Unlike stock trading, in Forex trade there is no physical documents such as share certificates or demat form. Your buying and selling status is maintained by the trading system.
4. Buy / Sell in pairs - In Forex trading you will have to buy and sell currencies in pairs. The fact is, when you buy a currency (say, USD), it is exchanged with another (say, JPY). This entity is known as a pair. 
5. Investments - The investment can be very low in Forex trading business compared to stock trading. You can start with a minimal investment of $50, to start your Forex business, since you will have the advantage of leveraging. Leverage (margin trading) will expose you to buy and sell currencies worth much more the actual amount of your investment.
6. Volume of Forex trade - The volume of Forex trade is very high. Even a small variation of 0.0001 in the traded currency can make a significant return on your investment. For this reason buying and disposal becomes easier for the traders.
7. Forex - A volatile market - Currency exchange is a very highly volatile market. A Forex trader should study the trend of price change of currencies. Pure speculation and guess work may lead to very high losses. Long years of comprehensive study and experience by a Forex trader, will ensure consistent profits.
8. Account Opening Fee - Usually, there is no account opening fee or brokerage charges. The Forex company keeps a commission for themselves.
9. Risks Involved - Forex trade is a speculative trade. Hence, there is a lot of risks involved in it. Economies, foreign policies, and political changes in different countries influences the business of Forex trading. For this reason, traders tend to invest in short terms.
10. Manipulation - The Forex market cannot be manipulated, since it is operated throughout the world, unlike the stock market where traders and insiders can manipulate it. 
11. Short Term Investments - Usually, the investments for Forex trade are short termed. Majority of the Forex deals are done on a day to day basis and some are done within a few weeks after the currencies are bought. Whereas stocks are held for months and years. Due to the volatility of the Forex market, traders usually close a deal within a very short period of time.
12. Forex trading software's - The advancement of technology has given the Forex traders the power of using modern software's, which handles all the Forex trade for them. There are many software's available in the net. But before buying them be aware, that not all the software's perform as  advertised.
13. Practicing the Forex trade on a Demo account - Before jumping into the trade you should practice the trade on a demo account available with the online Forex trading companies.  
14. Capping your transaction limits - In online Forex trading you can minimize your loss in trade by setting your 'stop loss' and 'take profit' elements. It is an automatic system where your transactions stops when the price of a currency reaches or falls a certain limit. This is an advantage for online Forex trading.
15. Forex trade is good during economic crisis - When the economy of a certain country faces a crisis, the business of the country as a whole suffers. But the Forex traders will not be hit by the economic crisis of their country, since they are dealing with the global market.
16. Online Forex Brokers - In order to start an online Forex trading business, you have got to open an account with a Forex broker company. That will be your 'Forex Trading Platform'. You can find a lot of these companies by searching Google. Be careful while choosing a company - read and compare the terms and conditions and consider the pros and cons before the sign up process. After you sign up, you will have to add money to your Forex trading account to start trading. The practice account should be available before adding money to your real account. Please do practice on the practice account and do all your homework before starting the actual business.
17. Forex trading and online money transfers - The transfer of money to your account will be through Paypal, Credit Cards, Wire transfers etc. Check with your Forex trading broker on this matter, even before you join.
18. Legality of Forex trading in different countries - There are different laws on Forex trading in different countries. The laws are not the same for all counties and it varies from country to country. You should check the prevailing laws on Forex of your country.

In my next blog I will write more on FOREX. Hope this article was informative.

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