With a daily turnover estimated to be at a staggering 3.98 trillion US dollars in April 2007 (further to a study by the Bank for International Settlements), it is no wonder why Forex is becoming so popular. Seemingly exploding in popularity in recent years, it has provided some with the ability to not feel any particular effects of the global recession, acting as a financial barrier, whilst others have struggled on.
If you are thinking of trading Forex, there is no doubting that the benefits can be particularly large. Closing several successful trades on a regular basis could see you earning a very respectable residual income, with the additional bonus that it is something that doesn’t require for you to spend your time filling in surveys or selling other peoples second hand goods and can be done relatively quickly from the comfort of your own home.
Unfortunately, trading on the foreign exchange market is not something that can be carried out successfully after reading only a few online resources or speaking to one or two professional traders. Although both of these will help any novice, it has to be expanded upon several times over, with first time traders needing to spend month’s researching and learning the different aspects of this form of trading.
The primary reason why so much learning needs to take place is that the Forex market is one of the most volatile of any trading environment. Volatility is something which goes hand in hand with most other types of trading, but with Forex it is something that is the primary focus for traders.
Almost anything can affect the price of currency and if you do not understand what are the main affecting factors and what to do when they show up, your life as a trader can be over before it has even begun.
Take the recent announcement of the General Election. On 6 April, the Prime Minister Gordon Brown announced that there would be a General Election in a month’s time on 6 May 2010. Almost instantly, according to Reuters, the value of the GBP fell by nearly 0.7 percent in comparison to the USD. The reason behind this was that there are concerns that there could be a hung parliament (the outcome of an election where no party has a majority seat count) in 4 weeks time, meaning particular unsettlement with the UK economy.
Now, if you are a beginner Forex trader, it is likely that you will have seen the drop in the GBP. It also wouldn’t be a surprise to hear that you knew it was related to the election. However, it would be surprising to be told that you knew why the election announcement had such an effect and that you made sure that all of your related trades were completed to benefit you around this announcement before it was made.
Trading Forex is not easy. You need to choose a broker, a MT4 download and have some money that you can afford to lose. Couple this with having to learn about this type of trading in depth as well as a vast amount of the affecting factors and it is enough to put anyone off. However, if you stick with it and spend the necessary months learning, you can almost guarantee that you will see a substantial return on your investment once you begin trading.