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If you are searching for a money-making hobby akin to the stock market, then the Forex market might be what you are searching for. Forex is an acronym of ‘Foreign Exchange’ and is sometimes written as FX. The Forex market deals with all the currencies of the world and their correlation with each other. The Forex works on a similar basis as the stock exchange.
However, Forex is not the same as a stock exchange in that it is a global market working 24 hours a day, 7 days a week. For example, the NASDAQ, the DOW or the FTSE are only concerned with firms that are active in their own country and are only accessible to most people from 09:00 until about 16:30 local time. Therefore, stock exchanges are far more restricted than Forex.
Forex deals normally come to trillions of dollars every day of the week and you can decide which currencies you want to specialize in: say, the USD against the GBP, written as USD-GBP or vice versa. The major currencies are USD, JPY, GBP, CHF, EUR, AUD, NZD and CAD
The gamble that you will be making is the rise or fall of one currency against another. For instance, you may think that the GBP has fallen enough against the dollar and that once the election is over and there is less political ambiguity, the GBP will rise against the USD. That would be your bet. You may believe that the Iraqi war will end soon and that the Iraqi currency will then rise against the dollar. Again that would be your bet.
There are a lot trading strategies that you ought to learn over time, but if I included them in this short article, I would not be able to do the strategies justice. If you want to investigate Forex trading, you should get hold of a specialized book on the subject.
However, one of the most essential concepts or strategies in the Forex market has a counterpart in stock exchange trading: that is the stop-loss. The stop-loss is an order that you put with your Forex dealer that if you start losing money heavily, they will automatically sell your positions (bets) for you. This is effective if you make a serious error of judgment or something unexpected occurs, like a terrorist bomb or a revolution.
The downside of a stop-loss limit is that it consolidates a loss. The loss is there, written in stone, whereas if you keep the bet open, it may recover. Because it is easy to lose money and lots of it very quickly, it is wise to only gamble with money that you can afford to lose.
Some Forex trading companies allow quite small minimum bets, but you have to take into account the cost of placing the bet. The Forex trading company may charge 1% of the gamble or a fixed rate like $10 per trade. This will influence the minimum bet that it is worth placing. Therefore, some research is required before placing a bet. First you investigate the countries concerned and then you, work out how much the currencies will move and then you add on the cost of the bet. That will tell you how much the currency has to rise before you make any money.
Owen Jones, the author of this piece, writes on many subjects, but is currently involved with Forex dealing. If you are interested in dealing with an FX Trading Account, please go over to our website.
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