The forex (foreign exchange) market enables individual investors and companies to speculate on the direction of currency value movements. As with any type of online trading, you have to determine whether an asset (in this case, a currency pair such as EUR/USD) will rise or fall in value.
As you can appreciate, values can go up, down, or even stay the same for a period. The forex market trades on a 24/5 basis. That is, you can trade 24 hours a day, five days a week. These days, forex trading is no longer exclusive to investment firms and those with huge bank account balances. Retail traders (or “investors”) can partake in online currency trading, even from the comfort of their homes.
How online currency trading could work for you
One of the great things about forex trading is that you can take calculated risks when opening new trading positions on the market. Many traders open positions with a view to leaving them running for several hours or even days until their desired exit position gets reached.
If you’re someone who enjoys analyzing data and has a relatively good track record for predicting outcomes, online currency trading could work for you. Similarly, if you’re looking for ways to invest your money without the rigmarole of using investment firms and third parties, the forex market might work for you as well.
What are the risks of online currency trading?
As with any investment, you could end up losing money as well as making it. Thankfully, online currency trading brokers have mechanisms in place to help you avoid losing most or even all of your investments.
One such example is a guaranteed stop loss. In a nutshell, this is where a trading position will automatically close if the current value drops or reaches a certain price in the opposite direction to your trade.
How can I trade safely?
First of all, if you’re not very familiar with online currency trading, it makes sense to educate yourself on the subject. You can also apply the concepts and techniques that you learn by trading with a broker using a demo account. This is where you can open and close positions without investing (or winning/losing) real money.
Next, you should only trade using a reputable broker, preferably one based in your country and governed by it as well.
If you’re going to trade online currency pairs, be sure to look for a broker that has low forex spreads. In case you didn’t know, a “spread” is the difference between the price that assets can get bought or sold.
Do you physically buy and sell money?
In a word, no. You are simply speculating and trading on the movement or direction of prices in your desired currency pair. There is no physical money being bought and sold, hence why the forex market is so accessible to both investment companies and retail traders alike.
Good luck with your new trading career!
If you’re looking for extra money to earn while working from home, check out How These Stay-At-Home Moms Earn Money As Mompreneurs.