How The Internet Sparked The Boom In Forex Trading

How The Internet Sparked The Boom In Forex Trading



How the​ Internet Sparked the​ Boom in​ Forex Trading
Unless you've been living under a​ rock the​ past decade or​ so, you've undoubtedly heard a​ new 't know, forex is​ short for​ foreign exchange, and​ it​ is​ the​ market in​ which international currencies are traded .​
Historically, government central banks, hedge funds, major international banks, and​ extremely wealthy individuals have been the​ big players in​ the​ forex: George Soros, for​ example, made his fortune trading currencies -- he made over $1 billion in​ a​ single month once! But ever since the​ Internet reached the​ masses, the​ forex has become a​ favorite trading platform of​ everyday individual investors like you​ and​ me.
Why has the​ Internet been so important to​ the​ expansion of​ forex participation? Well, for​ one reason, forex trades have zero commissions .​
This means in​ the​ days before the​ Net, investment advisors couldn't make money convincing their clients to​ trade currencies, and​ without the​ Information Superhighway, individual investors had no way of​ placing forex trades themselves .​
But now, with worldwide cyber-connectivity, anyone and​ everyone can play the​ forex -- it​ isn't just for​ the​ Alan Greenspans and​ George Soroses of​ the​ world, now.
A Few Caveats...
It is​ important to​ note that while there are no commissions charged on​ forex trades, there is​ a​ spread between the​ bid and​ ask prices of​ each currency pair .​
For example, the​ currency pair of​ the​ U.S .​
dollar and​ the​ Canadian dollar, expressed as​ USD/CAD, may have a​ bid price of​ 1.0590, and​ an​ ask price of​ 1.0595 .​
What the​ heck does that mean? It means that that you​ can obtain 1.0590 Canadian dollars for​ every one U.S .​
dollar; or​ you​ can pay 1.0595 Canadian dollars for​ every one U.S .​
dollar .​
In other 've ever exchanged Canadian dollars outside of​ the​ forex, i.e .​
on a​ trip to​ Canada, you're undoubtedly familiar with this spread.
Secondly, it's important to​ note that forex accounts allow you​ to​ have a​ tremendous amount of​ leverage .​
Typically, you​ can control $100 of​ currency for​ every $1 in​ your account .​
So, for​ example, if​ you​ were to​ risk $1,000 of​ your actual money, you​ could control $100,000 worth of​ currency .​
If the​ currency appreciated went up by 1%, you​ would make 1% of​ $100,000 -- $1,000 -- i.e., you'd double your money on​ a​ 1% move! But if​ the​ opposite occurred, if​ your currency depreciated went down by 1%, you​ would lose 1% of​ $100,000 -- i.e., your entire investment .​
And you​ can imagine what would happen if​ your currency went down by 2% or​ more!
So the​ best advice is​ to​ play it​ safe .​
Read up on​ the​ forex and​ open a​ practice account before risking real money .​
The forex is​ the​ largest and​ most exciting financial market in​ the​ world, and​ you​ don't have to​ be a​ genius to​ make money in​ it, but you​ should at​ least have the​ basics down .​
Good luck!




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