For decades, foreign exchange trading was nearly impossible for the ordinary person to take advantage of. The process of investments were complex and didn’t allow many to take advantage of the financial markets. Investors relied on the services of a stock broker, who would make buy and sell orders on the investor’s behalf.
Today however, using advanced technology and the internet, everyone has the opportunity to manage their own investment and make their own decisions.
Empowered by fast developing technology, foreign exchange trading has become accessible to anyone who wants to learn how to trade the currency market.
Foreign exchange trading has seen a significant increase among inexperienced and professional investors in the last couple of years. It has become a source of income for many people, and some of them have started with no previous experience and no knowledge in forex trading.
24-Hour Market Action
The forex currency markets are a 24-hour marketplace, giving investors the freedom to trade whenever they want.
The currency market is the most heavily traded financial market in the world, with a daily average turnover of around $5 trillion. As the largest markets in the world, the cash forex markets offer excellent liquidity at all hours of the trading day, unlike many other 24-hour markets. This means you can trade large amounts of volume into and out of the forex markets with minimal market impact.
Forex markets provide the most leverage amongst all financial asset markets. The arrangements in the Forex markets provide investors to lever their original investment by as many as 20 to 30 times and trade in the market! This magnifies both profits and gains.
Forex markets provide traders with a wide variety of trading options. Traders can trade in hundreds of currency pairs.
Forex market provides an environment with low transaction costs as compared to other markets. When compared on a percentage point basis, the transaction costs of trading in Forex are extremely low as compared to trading in other markets.
Online stock trading may be daunting for beginning traders, but with the right foundation and a gradual investment of funds, you can expect to see significant returns. Here are a few tips to help you make smart investment decisions.
Do not invest money you cannot afford to lose. Make intelligent decisions about what you can afford to invest, and begin slowly. Once you have realized gains from one or two stocks, you can begin to reinvest those gains — which have now become your principal — into other stocks and funds.
Diversify your investments. While stocks offer the attraction of seemingly easy money, they are unreliable sources of income. Consider investing at least a portion of your money in an electronically traded index fund, which holds many stocks. ETFs can be purchased and traded like stocks, but because they are diversified, losses in a given sector may be cancelled out by gains in another.
Don’t trade if you don’t have time to research. Stock trading should be approached as a part-time job. Like any job, your skills will suffer if they are not frequently practiced. In this case, “practice” means reading the latest news and financial reports on companies in which you are considering investing. If you do not have time to practice, consider investing in an index fund instead, or hand your investments over to a qualified professional.
Make a plan. Irrationality is the enemy of stock trading. Before buying a stock, consider what circumstances would lead you to sell it. For example, you can decide that you cannot risk more than 20 percent of your investment. Many brokerages have the ability to schedule buy and sell orders based on predefined criteria, such as a percentage drop (or increase) in your original investment. Scheduling limit orders takes the emotion out of your finances.
“Have a plan and stick with it,” Beauregard said. “Know why you are buying a particular security, how much to invest, what your expected return is, and have an exit strategy.” Don’t buy high. Stock may be trending upward at an extreme pace, in which case you shouldn’t always jump to buy stock. Wait for opportunities to get a lower entry point.
Don’t give in to fear. Something many beginning stock traders deal with on a daily basis is the fear of losing money invested. While you may see stock values plunge for a company, don’t despair or pull your money out. Stock trading is a long-term investment and requires patience and perseverance.
Greg Secker is the founder of Learn to Trade, South Africa’s largest and most successful brand providing education in Foreign Exchange trading. Over the last 10 years, they’ve had over 200 000 people from over 80 countries attend their complimentary workshops.