FOREX - A Brief Introduction

Tweet

While looking for FX Traders to start a discussion on serious FX stuff. I found a bunch of dangerous posts, I think I will write something about it... FOREX or FX stands for foreign exchange, it affects us day in day out, whether you know it or not. Which I am not going to touch on it. I am not going into the history of it either. When we talk about the FX market, normally we refer to the Spot/cash market. It is a highly speculative market, and unknown to most, it is one of the riskiest market in the world. (Also one of the safest.) How does one make money from FX? You buy one currency and sell another currency. For the sake of simplicity, I will take an easy example... Let's pretend that the Money Changer at your local airport is the FX Market (Infact it really is... sortof). So you have 100 USD, you go to the money change and tell him, you want Yen. The rate of Dollar to Yen is ... 1 : 100. With 100 USD you can get.. 10,000 Yen When the value of the Yen goes up, the new rate is 1 : 50 So you bring your 10,000 Yen back to the money changer and ask him to change it back to Dollar, so you get 200 Dollar. Of course this is an exgerated and overly simplifed example of how trading goes on. But it's pretty much the same minus the "hidden" charges. With marketing and advertising, more and more new players are getting sucked into the FX trap. Making a living out of FX with a capital less than 100K is virtually impossible. At least with the risk management system I have adopted I can't do that. And the risk management system came from the more respected professional traders. If they can't do it what makes you think, you as a newbie can do it? Another thing about FOREX, it isn't easy to learn, it's learning curve is very steep. As George Soros (the legendary trader who broke BOE) wrote in his book "The Alchemy of Finance". He paid back every cent he got from breaking the BOE back to the FX market. To trade FX, one needs to know the Fundamentals as well as the technicals. You might not need to use both at the same time, but definitely need to know about it. Depending on the type of trader you want to be, you might want to focus on one more than the other. As traders, its bad enough that we have to deal with our number one enemy, OURSELVES. As FX traders we need to deal with another enemy, our brokers. Some if not most, brokerage will trade against you. They have something called the Trading Desk. These are the brokerage brokers, and they will frequently run stop hunts. Meaning take you out, since they know what you bought, what is your capital, where are your stops etc. FX is not something you can get rich easily, frankly speaking. There is a higher probability that you will do better in a casino... BUT if you really want to profit from FX, you have to put in a lot of time, effort and money in education. Online courses? They are are start... but don't keep dwelling on it. They are only introductory... mostly. There is more to FX than this. If you are serious check out the links, read the forums, attend the free webinars, ask the gurus. Resources... FXStreet.com FOREXFactory.com Make use of the forums... and brokerage reviews. I am not going to introduce my broker to anyone... I am starting to worry if it is going to close. And I am in no way associated with these sites. Serious FX Traders... wanna network? Can use other IMs. Thanks!