Some Reasons Why You Should Trade Forex and Two Important Forex Concepts You Must Know.
These days everyone is talking about Forex trading and the great
opportunity this activity represents for people willing to brake
free from the corporate world and start working from home or any
where else without losing their current lifestyle and even
improving it.
Some of the great reasons why Forex trading is a great way of
entering the capital markets is that is all commission-free and
it has a low transaction cost. All the best forex brokers have
these characteristics and even Mini FX traders (i.e., traders
starting with accounts having a capital as low as $250), who are
just starting in this field, can buy and sell currencies online
always commission-free.
When trading the Forex
markets you don't have to worry about fees you may have to
pay to your broker; there are also none of the usual fees to
which futures and equity traders are accustomed to pay always;
no exchange or clearing fees, no NFA or SEC fees.
Over-the-counter currency trading involves a bid/ask spread and
that's how the brokers make money. The good news is that the
currency market is capable of offering you a round-the-clock
liquidity and this way you will receive tight, competitive
spreads both in intra-day and night trades.
Now, once you enter the world of forex trading you will need to
learn about two very important concepts. These are; "Pips" and
"Buying and Selling Short". Let's talk about "Pips" first.
Currency pairs prices are considered always to go out to 4
significant digits. For example; if one currency pair is trading
for
1.3451 then if the price increases to 1.3452, that would be
a "one-pip" increase in the price of this particular currency
pair. This is an increase of one hundredth of a percent of the
value of the currency pair you are trading at the moment. And
depending the type of account you are using, regular or mini,
each pip will have a value of $10 or $1. So if you make 10 pips
a day with a regular account you would have made $100 and with a
mini-account $10.
The concept of "Buying" in Forex refers to the acquisition of a
particular currency pair to open a trade and "Selling short"
refers to the selling of a particular currency to open a trade,
i.e, just the opposite. When you Buy, you are expecting the
price of the currency pair to increase with time, i.e., you buy
cheap to sell high; which is easy to understand. In the case of
Selling short, it looks a bit more complicated. Here the way to
make money is to initially sell a currency pair that you think
will lose value in a given period of time and then, once it
happened, you will buy it back at the new price but now you can
sell it at the previous greater price the currency had when you
opened the trade, so you earn the difference in prices. It may
seem kind of tricky when you are starting, but once you are in
front of your trading station it will look much simpler.
About the author:
Adrian Pablo is a Forex freelance writer with articles published
in a number of places. Get a free report on Fibonacci Trading
and learn more about the world of trading , visit:
http://www.1-forex.com
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Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest / trade in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading.
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