Whether you religiously follow the news which brings you the latest from the world of economy or not, you might have noticed that the value of currencies has been changing constantly, even on an hourly basis. What most people don’t realize is that they can profit simply by following those oscillations, and investing smartly.
The foreign exchange market or forex as some people like to call it is the market where those previously mentioned currencies are bought and sold. It is decentralized and it consists of a couple of large economic centers located in various places around the globe. The biggest are in London and New York, but Singapore and the others are not so far behind. The market is open five days a week, with the weekends off. Since it works around the clock, you can choose when and where to invest. That trait surely comes in handy for everyone involved. Also, the transactions are completed over-the-counter, which means that they are done through the online networks between the various traders.
Forex used to be reserved for leading governments with strong economies and large companies that have a lot of money to spend. But the widespread of the internet made currency trading available to everyone interested. Lately, both traders and investors have realized the opportunities this market offers and it is becoming more and more popular as we speak. One of the most attractive qualities of forex is that you don’t have to be an expert or solely into the art of trading. You can be a business owner slightly interested in currency trading and still make a profit.
However, it is also important to be aware of the fact that there is always a risk involved.
What makes forex trading so special?
Forex is unique because it gives you a so-called freedom of trade. For instance, when we compare it to New York Stock Exchange, we see that there are fewer rules and regulations involved with forex trading. It is not controlled by a single board of managers and agents who oversee every exchange. That can be helpful for some because if you get an exclusive inside tip about a possible future currency change and you use it to make profit, there is absolutely no way for the deal to get canceled, unlike the similar deals done on New York Stock Exchange.
Also, there are fewer fees. As a matter of fact, there are absolutely no exchange fees. Of course, brokers have to make money somehow. The difference in money you pay to buy or sell currencies is their profit. It is worth mentioning that there are no brokerage fees as well, even thought that is a common trait in most markets. Brokerage fee is usually charged by an agent or a company if they act as a middle man between buyers and sellers. They are even prone to charge a simple advice.
Some markets put limits on the money you are allowed to spend daily, weekly, or in general. However, there are no such things on forex. The amount of money you are willing to sell is not restricted. If you want to sell one million dollars, you are free to do so. It is the same way if you are buying – there is no maximum.
The popularization of the internet changed the world. Surely, it also made a huge impact on the way the currency trade is done. The accessibility and the rapid development of new technologies allow almost everyone to take place in online currency exchange if they wish to do so. Since Forex spreads over the time zones and it is not fixed to one place only, you have the opportunity to choose when and where to trade money. There is also no need to make it your primary occupation. It can be done during the free time, without putting your job in jeopardy. The market is open around the clock and currency trading happens every minute. You can rarely get stuck with selling or buying money since the market is always active and all you need to do is to simply push the button.
How to choose an online brokerage firm
Once you decide that online currency trading is something you want to try, the next step would be choosing a brokerage firm which will serve as facilitator in your future transactions. It is important to do as much research as possible and there are a few factors you need to pay close attention to.
Firstly, find out the age of the brokerage firm. You need to look for a firm with the experience which would indicate that they know what they are doing and they know how to treat their clients well. It might seem silly, but the design of their website is meaningful as well. The website should look polished and professional. If the links are broken or if anything seems suspicious, such as asking for your personal information right away on the front page, it is maybe better to cross them out from the list of your possible choices. The chances are you have stumbled upon one of the fake brokerage firms. Hackers see their opportunity everywhere and foreign exchange market is not an exception. Therefore, you need to be cautious and wise in deciding who to trust your money with.
Secondly, the brokerage firm is not obliged to register with an agency which is responsible for overseeing and making sure that all of the transactions are paid regularly. However, if they do so, that means they are genuinely concerned about their client’s online safety and their finances.
Thirdly, reviews can be beneficial in this situation but you should always take them with a pinch of salt. Anyone can write reviews and with that said, nothing can guarantee the honesty of someone’s opinion. Also, some firms write the reviews themselves in order to improve their ratings and attract the clients. If you want to read the reviews, look for websites which specialize in ranking the brokerage houses.
To conclude, the safest way to make the right choice is to either look for a brokerage firm that is well-known and established, or perhaps ask a friend who is into forex trading as well to recommend you their brokerage firm. If you run in the same circles with other booming business people, that shouldn’t be too difficult.
The risk
Finally, it is really important to be aware of the risks when trading in foreign exchange market online. First of all, you need to make sure you that understand all the possibilities. It is really easy to lose money as well, and that is bound to happen if you jump into the trading without informing yourself properly. It might seem easy at first glance, but there are a lot of things you need to learn. Luckily for the beginners, some websites offer starter or tutorial accounts which are free. Yes, you do trade with fictional money in those accounts, but you follow the market nevertheless and you have the ability to learn how the entire procedure actually works.
If you master this mock account and you are not losing money but actually earning it, you might try your luck with the actual trade. But once again, you need to be realistic with your abilities and with the available funds, as well as with the gamble you are willing to take. You can profit one day and lose everything the day after. And that is what makes this market so attractive and intriguing.