Making Money via Forex Trading
People have been trading in foreign currencies since time immemorial, but it has been only in the past half century that it has developed into a huge industry. The Breton Woods agreements of 1944 and 1971 led to the start of the forex industry since it enabled currencies to float freely in order to avoid problems caused by currency warfare. As of the present, the industry operates 24/7, with trillions of dollars being transacted daily by traders who exchange any sets of currencies of their choice.
Internet Revolutionises Forex Trading
Forex trading has indeed been an established industry, but it has been the preserve of institutional investors and large banks. The main purpose of the forex industry was to facilitate the import and export of goods and to make investments abroad. However, the industry has changed dramatically over the past five years or so, because it now sees a proliferation of individuals participating in it. The main reason has been the widespread use of the internet to transact online without having to be in one of the major financial hubs of New York, London, or Tokyo.
Since increasing numbers of people are using the internet for all sorts of purposes, they are open to the idea of trading in foreign currencies using this medium. In other words, it is now possible for almost anyone to become a forex trader as long as they have some spare money and an internet connection. Forex brokers are feeding this demand by offering their own online trading platforms. Individual traders can start trading with a small amount since platforms now offer then attractively high leverage.
Small retail investors now have a major role to play in the global foreign exchange market since their overall contribution to it is very high.
Anyone Can Trade in Forex
It is possible for anyone to start trading in foreign currencies in order to earn a lucrative income. Since the market is very liquid, the prices of most currency pairs fluctuate rapidly. As a matter of fact, the currency movements happen so fast that it is often possible to buy and sell currencies within a couple of minutes. It is essential to choose a good forex trading platform amongst the many available. Traders should also take the trouble to learn about the business while also keeping abreast of global financial, political, and social events. Traders should also learn how to do technical analysis because reading price charts are very important to achieve success.
There are different ways to make money by trading in Forex. The most common method is to speculate on currency prices. This means that they buy a currency while selling another currency at the same time. The most popular currency pair is GBP/USD, and if the rate of the Pound Sterling climbs vis-à-vis the US Dollar, then the trader who has bought GBP/USD will make money. Many people also participate in carry trade in which they play the difference in interest rate between two currencies.
Leverage Makes Big Trades Possible
If the trader uses leverage from the broker then the profits can reach high levels. It is quite easy to get 100:1 leverage, which means that the person can do a trade worth $300,000 with a deposit of just $300. Of course, this also means that big losses are possible. In fact, traders should be wary of using too much leverage because of the risks involved.
In conclusion, it is possible to make a bit of money if one gets involved in forex trading as long as one does the necessary homework and takes sufficient precautions.