Forex is the common term for foreign currency exchange, which refers to the purchase of one currency using another. In a way, forex is the modern version of barter trade used by ancient humans to exchange goods between communities.
The forex market today sees trades worth several trillions of dollars every single day. It is a viable option to earn money with virtually no effort if you understand and apply some basic principles.
Factors to consider
As with any investment, you should understand the pros and cons of trading forex before you begin. Here are the most relevant factors:
Knowledge
Every investor’s best friend is knowledge. You can learn about cfd forex from the experts but ask yourself these questions, too:
- Are you familiar with how the currency markets work?
- Can you follow forex news and its market-specific jargon?
- Do you know which factors affect base pair rates?
Personal preferences
Facts and figures form the foundation of forex knowledge but personal preferences have a direct impact on your success, too. To find your personal preferences, ask yourself questions like:
- Am I investing for the short or long term?
- How much of a loss am I able to sustain?
- Will I be able to control my emotions of both panic and excitement?
The answers to these questions dictate your trading style and usually have a greater bearing on your returns than knowledge alone.
Trading Times
One of the chief differences between currency markets and ordinary share markets is when they are traded. The stock market in each country operates during normal working hours, five days a week. Currency markets are traded 24 hours a day, from Sunday night to Friday night.
Trading in forex means that there is a significant portion of trading hours where you will not be able to follow changes. While it is rare for forex rates to reverse very substantially overnight, it is something to consider.
Discover for yourself
If you are seriously considering investing in forex, use an established site like Forex TB to learn more before you start.
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