While you are learning to trade forex, bear in mind that you are embarking on an activity that has a daily turnover on average of between $1.5 trillion to $2.5 trillion. That's a lot of money! One billion is one thousand million, and a trillion is one thousand times that again. There's a lot of money to be made, so learning to trade forex is certainly a good skill to have.
Forex is an acronym for foreign exchange. Forex trading continues day and night without a break; as one market closes, others open and this keeps going on and on all over the planet.
Trading is done on the differences between currencies and is always done in pairs. You can trade the American dollar against the British pound, or the Japanese yen against the European euro, or any of the other world currencies.
Learning to trade forex properly does not mean jumping in and trying your hand. You will probably lose everything with a method as poorly thought out as that. There are three attributes that you must learn to employ to have any chance of being successful: patience, discipline and simplicity.
Trading in forex has risks, big risks sometimes. For this reason the online forex companies offer you the chance to trade with a demo account. This is exactly the same as the real thing, but no real money is involved.
This kind of training is invaluable. This cannot be stressed enough. Practice on demo accounts for as long as it takes for you to consistently make profitable trades. There will be some losses of course, but you must get to the stage where you are profiting more often than losing. Then, and only then, consider trying to trade for real.
If you keep it simple, discipline yourself to only trade a low percentage of your overall trading amount, and have the patience to see slow but steady profits, then you will have gone past the learning to trade forex stage and have entered the realm of the sensible and usually successful trader.
The foreign exchange market, also known as the forex or FX market, in the form that we know it was established as recently as 1971. Prior to that there were the fixed currency exchanges.
Trading in foreign exchange is conducted on a twenty-four basis for five days of the week, every week. It is a global currency market, though the big three of the US dollar, the Japanese yen and the European euro tend to dominate. Learning to trade forex is therefore something that's not limited to certain times. The market is active constantly during the working week.
Currencies are traded in pairs and are identified by three letters. The first two letters usually identify the country involved, and the third letter identifies the currency of that country. For example, USD is the American dollar, JPY is the Japanese yen, and GBP is the British pound. Learning to trade forex is not difficult if you don't let it be so.
Copyright (c) 2008 Steven Magill
Examples of futures are oil futures, steel futures, agricultural futures like corn, soybeans, sugar and wheat, or pork bellies. Any kind of product that's produced in large quantities with regular production cycles, lead times of more than a month, seasonable variations in availability and price, and near constant demand for the raw material can be the subject of a futures contract.
Futures can be thought of as agreements to sell or buy commodities at a specified price in the future, regardless of the market conditions. If you need the commodity in question, you may buy futures to hedge against a future rise in price. If you sell the commodity in question, you're buying futures to hedge against a decrease in price.
Buying and selling futures contracts allow people to buy and sell the commitments to buy products in respond to market pressures. Unlike stock portfolio or bond investing, you aren't buying a chunk of a corporation or a debt commitment to be paid back with interest, you're taking a gamble on the future price of a commodity.
Futures trading is risky, as is any kind of investment, but some of the risk can be ameliorated by taking on a diversified portfolio.
What Makes For A Good Futures Trader?
The personality type that thrives in futures trading is that of the professional gambler, the person who is certain that their instincts on the way commodities will flow will beat the market trends. (It is possible to take buy-and-hold positions with futures, but that tends to be less lucrative and less volatile. In general, it's also less sound than buy-and-hold strategies for stocks and bonds.).
Backing up that instinct is a lot of technical analysis. Futures traders watch all the news; for example, news about the weather directly impacts growing seasons for commodities such as corn, soybeans and sugar. News about port regulations impacts futures relating to delivery of durable goods and oil from overseas. News about increases in production capability at refineries, or improvements in oil extraction techniques can change the price of oil and often in counterintuitive directions!
There is a lot to learn to become a successful futures trader; you'll want a mentor, and a couple of classes to learn the terminology, the regulations, and how to spot market trends (and how to divorce yourself from your own analysis, so that you don't blind yourself to important trends because you're in love with your own ideas.)
Interestingly, while futures are contracts meant to reduce risk between producers and purchasers of commodities, the trading of futures is a high volatility market.
While there is risk, it can be (somewhat) ameliorated, and there are often trends that are easy to pick out that will help you avoid risk.
The key to being successful as a futures trader is knowing when to NOT gamble, when to take what you've got and call it a day with a reasonable return on your investment.
Both Steven Magill & Amar Mahallati are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.