Make Money with FOREX

January 28, 2008

I just read this little number on that ezinearticles website, and I thought it looked pretty interesting, So I thought I would share the words of the author Rich McIver

For those unfamiliar wif da term, FOREX (FOReign EXchange market), refers ta an international exchange market wher currencies aur bought `n` sold. da Foreign Exchange Market dat we see today began in da 1970’s, when free exchange rates `n` floatin currencies were introduced. In such an environment only participants in da market determine da price of one currency against anutter, based upon supply `n` demand fer dat currency.

See our newest page that explains all the currencies and all that other good stuff. Redneck Forex

FOREX is a somewhut unique market fer a number of reasons. farstly, it is one of da few markets in which it can be said wif very few qualifications dat it is free of external controls `n` dat it cannot be manipulated. It is also da largest liquid financial market, wif trade reaching between 1 `n` 1.5 trillion US dollars a day. wif dis much money movin dis licketdsplit, it is clyear why a single investor would fin` it near impossible ta significantly affect da price of a major currency. Furthermow, da liquidity of da market means dat unlik some ryearly traded stock, traders aur able ta open `n` close positions wifin a few seconds as yonder aur always willing buyers `n` sellers.

Anutter somewhut unique characteristic of da FOREX money market is da variance of its participants. Investors fin` a number of reasons fer enterin da market, some as longer term hedge investors, while others utilize massive credit lines ta seek large short term gains. Interestinly, unlik blue-chip stocks, which aur usually most attractive only ta da long term investor, da combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors wif a broad range of strategies.

How FOREX Works

Transactions in foreign currencies aur not centralized on an exchange, unlik say da NYSE, `n` thus tekk place all over da world via telecummunications. Trade is open 24 ares a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday ta 10:00 pm GMT on Friday). In almost evary time zone `rounst da world, yonder aur dealers who will quote all major currencies. After deciding whut currency da investor would lik ta purchase, he er she does so via one of dese dealers (some of which can be found online). It is quite common practice fer investors ta speculate on currency prices by gettin a credit line (which aur available ta those wif capital as small as $500), `n` vastly increase their potential gains `n` losses. dis is called marginal trading.

Marginal Trading

Marginal trading is simply da term uset fer trading wif bard capital. It is appealing because of da fact dat in FOREX investments can be made wifout a real money supply. dis allows investors ta invest much mow money wif fewer money transfer costs, `n` open bigger positions wif a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quick as a wink `n` cheaply, wif a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. da term “lot” refers ta approximately $100,000, an amount which can be obtained by puttin up as li`l as 0.5% er $500.

EXAMPLE: Yew believe dat signals in da market aur indicatin dat da British Pound will go up against da US Dollar. Yew open 1 lot fer buying da Pound wif a 1% margin at da price of 1.49889 `n` wait fer da exchange rate ta climb. At some point in da future, yore predictions cume true `n` yew decide ta sell. Yew close da position at 1.5050 `n` earn 61 pips er about $405. Thus, on an initial capital investment of $1,000, yew have made over 40% in profits. (Just as an example of how exchange rates change in da course of a day, an average daily change of da Euro (in Dollars) is about 70 ta 100 pips.)

When yew decide ta close a position, da deposit sum dat yew originally made is returned ta yew `n` a calculation of yore profits er losses is done. dis profit er loss is then credited ta yore account.

Investment Strategies: Technical Analysis `n` Fundamental Analysis

The two fundamental strategies in investin in FOREX aur Technical Analysis er Fundamental Analysis. Most small `n` medium sized investors in financial markets use Technical Analysis. dis technique stems from da assumption dat all information about da market `n` a particular currency’s future fluctuations is found in da price chain. dat is ta say, dat all factors which have an effect on da price have already been considered by da market `n` aur thus reflected in da price. Essentially then, whut dis type of investor does is base his/her investments upon three fundamental suppositions. Dese rrr: dat da movement of da market considers all factors, dat da movement of prices is purposeful `n` darctly tied ta dese events, `n` dat history repeats itself. Someone utilizing technical analysis luks at da highest `n` lowest prices of a currency, da prices of openin `n` closing, `n` da volume of transactions. dis investor don`t try ta outsmart da market, er even predict major long term trends, but simply luks at whut has happened ta dat currency in da recent past, `n` predicts dat da small fluctuations will generally continue just as they have b4.

A Fundamental Analysis is one which analyzes da current situations in da country of da currency, including such thangs as its economy, its political situation, `n` other related rumors. By da numbers, a country’s economy depends on a number of quantifiable meashorements such as its Central Bank’s interest rate, da national unemployment level, tax policy `n` da rate of inflation. An investor can also anticipate dat less quantifiable occurrences, such as political unrest er transition will also have an effect on da market. b4 basing all predictions on da factors alone, however, it is impotent ta remember dat investors must also keep in mind da expectations `n` anticipations of market participants. fer just as in any stock market, da value of a currency is also based in large part on perceptions of `n` anticipations about dat currency, not solely on its reality.

Make Money wif Currency Trading on FOREX

FOREX investin is one of da most potentially rewarding types of investments available. While certainly da risk is great, da ability ta conduct marginal trading on FOREX means dat potential profits aur enormous relative ta initial capital investments. Anutter benefit of FOREX is dat its size prevents almost all attempts by others ta influence da market fer their own gain. So dat when investin in foreign currency markets one can feel quite confident dat da investment he er shaze makin has da same opportunity fer profit as other investors throughout da world. While investin in FOREX short term requars a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident dat their own ability ta rid da daily fluctuations of da currency market aur sufficiently adequate ta give em da knowledge necessary ta make informed investments.

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