Forex trading has existed for over 30 years, but until the rise of the Internet was almost entirely in the hands of banks and other institutions with large investment funds. This day ordinary people can participate, although financial institutions are still the major players. When I say that about US $4 trillion changes hands every day in the markets in currency trading you will realize that only a small part of it belongs to ordinary people like you and me.
For those using the Forex, a broker is usually a good idea. Brokers are professionals when it comes to trading on the Forex and their experience is invaluable, especially to the new trader. When it is time to find a broker, there are several factors to consider. One thing to look for when choosing a Forex broker is to go with someone that offers low spreads. The spread is calculated in pips, or the difference between the price at which currency can be purchased and the price it can be sold at any given time. Because how to choose best forex and cfd broker do not charge a commission, they will make their money off of the spreads, or the difference. When choosing a broker, look at this information and compare that with other brokers.
Don’t ever consider going against trends if you’re just a beginner at trading in the market. Never pick against the market. Trade with trends while you are getting used to the ebbs and flows of the market. Going against the flow of the market is not the best idea. The forex graveyard is littered with traders who have gone against trending markets.
The last great characteristic of the forex that we’ll discuss in this article is the never ending bull market. Forex is a zero sum game. A gain is only made when one currency rises in value in relation to another currency. So this means that if one currency is going down, another is going up. In the stock market, when a bear market hits, the vast majority of stocks are all going down. If Microsoft drops 5 points, that certainly doesn’t mean that GE went up 5 points. Sure, you can short stocks in a declining market, but the average investor isn’t too keen on the unlimited downside risk and probably doesn’t even have the margin to be able to make the trade. Just remember that something is always guaranteed to go up in the currency market.
The reason we are all flooded with these methods of making money is that the only way these people make money with these methods is to try to sell them to us. But with the other ways of making money you typically don’t hear about them much since people don’t have a need to sell the opportunities to make money.
And how does the knowledge of this practice help you? The idea is to open your eyes and start practicing to be the 5%. Stop making wild guesses with where currency prices are heading or listening to your friend with the “hot tip” that almost always disappoints and start educating yourself.
There was a time when a trader off the exchange floor had no chance in this game, but the advent of modern electronic brokerage companies has changed all that. Even though I trade from Australia, my brokerage company has very competitive fees and a platform that executes trades with minimum slippage.
Face it, all that CFD advertising and those free seminars must be paid for by something! Believe me, day trading is a tough business. An absolute essential is to minimize your costs. Look at every investment vehicle through the cost prism before deciding which path to take.