Forex is the world’s largest trading platform with close to four (4) trillion dollars a day traded. It is a high risk investment market but can be mastered through proper education, accurate advice, and some experience.
The Foreign Exchange Market (Forex, FX, or currency market) is a form of exchange for the global decentralized trading of international currencies.
Amazingly, after presenting it as a high risk investment platform, it can be a very safe investment vehicle if you have access to insider information. We define insider information as “looking over the shoulder of Forex investors that have verifiable high income producing success rates. But let’s explain some of the basics of Forex investment and really, explaining its pros and cons.
WHAT IS THE FOREX MARKET?
It is the trading platform enabling investors to exchange currencies of one country for another’s. For example, if the US Dollar is high, and the Australian dollar is at a low level, you may desire to exchange USD (U S Dollars) for Australian dollars.
You would make this currency exchange hoping the value of the Australian currency would rise. The lowers the exchange rate differential (called the “spread”) between the USD and the AUD (Australian Dollar). If the USD was valued at $1.00 and in comparison, the AUD was valued at $.80 in comparison, there would be a $0.20 spread.
If the AUD went up in value to say $.90 compared to the USD (still valued at $1.00 here), you could realize a $0.10 profit for each dollar you traded if you closed out your trade now. That would be a $100.00 profit for each $1,000 you invested.
Simply put, you’re buying a cheaper currency at a low rate hoping it will increase in value like any other product. If it goes up, you make a profit. If it goes down you lose money.
The Forex market assists international trade and investment by enabling currency conversion.
For example, it permits a business in one country, say Canada, to import goods from the Europe, especially Eurozone members, and pay Euros, even though its currency is in Canadian (or the purchasing countries) currency. It also supports direct speculation in the value of currencies, speculation based on the interest rate differential between two currencies
Some primary tools you’ll use
You’ll need a Forex account for your investment deposits which you would setup with a broker. Usually, a small deposit of $100 or $200 is the starting amount for beginners, though you can invest as much as you want. Typically, the deposits increase as you gain experience and confidence in you investment ability.
Set up a free practice account
The smart approach to learning this investment medium is to setup your own free practice (or demo) account. You are issued “virtual” or fake money (like Monopoly money) to invest. This allows you to learn, gain some experience, and determine when you are ready to start investing real money. All this is free.
You’ll need to familiarize yourself with the accounts investment platform, the software enabling you to access the online Forex marketplace. This is usually free too. And you’ll likely want to take a brief Forex course explaining the terminology and investing basics of Forex.
Our next article in the Maverick Investments Forex Series will cover the pros and cons of Forex investing.