Beginner Guide to Investing | Forex Trading | Currency Trading

Very few people realize the benefits of FX trading over normal investments in stock or otherwise. This is mainly due to a lot of misconceptions about forex as a whole. Forex is an excellent avenue for investments, and if you play it right, you could substantially increase upon your investments. First, it is important to understand what forex trading actually is. Trading in forex means trading in currency or foreign exchange. It is basically a trading form that capitulates in the difference of values between two different currencies.

Currencies belonging to two separate countries will have a different value with respect to each other. Now taking the respective values of a US Dollar and British Pound, 1 equals $ 1.59. If you were to buy $ 159 worth of pounds, that is, 100, and the next day the currency values fluctuated and 1 equaled $ 1.61, you would have a profit of $ 2. This may seem small now, but the volumes in which people conduct FX trading is very large and this slight change can result in huge profits and losses. These variations depend on a number of factors. If you do your study well and make your investments safely, you can eliminate the risk of loss substantially.

The Advantages

FX trading market is open 24 hours, seven days a week. Money never stops and that is why you have an amazing freedom when you trade in currency. FX trading is different from trading in stock where you have to deal and trade during the day. For the people who have other full-time jobs, this can be quite tiresome. They cannot devote as much time as they want to their investments. This is troublesome, because if you are not fully involved, you could make a slip up and incur losses. With forex trading, you do not have to worry about such problems. The market is open always and you can check your investments at all times.
The next great advantage in FX trading is that of leverage. Leverage means that you only need a particular amount of money to take part in a trade or a deal. So, if the leverage is 20:1 on a trade worth $ 10,000, all you need is $ 500 to take part in the trade. This is an excellent thing that gives you the advantage of taking part in deals that will give you immense profit.

With foreign exchange, you can set the limit of your own losses, to the point up until which you are willing to bear them. So, if the currency you are investing in falls to that point, you automatically withdraw. This means that with leverage you have a chance of taking part in big deals with small capital. Imagine that in the above example of pounds and dollars, the deal was for $ 159,000. You can get leverage up to 32:1, so the profit is humongous. You can participate in these deals if you can come up with just 1/32 of this amount.