For the individual who is considering investing in the FOREX market the first time, this basic introduction and overview will help them understand how it works.
Until recently, it was safe to assume that the Forex market was not a playground for the ‘little guy’ or novice investor as far as investing in foreign currencies was concerned. Characteristically, it had been the realm of the larger financial institutions as well as central banks, corporations, hedge funds, and other wealthy individuals. Generally speaking, the fluctuations in currencies are relatively small, and since most of the paired currencies move in small increments of a penny or less, this equates to a 1% (or less) movement daily.
Leverage is relied upon heavily by investors and speculators in order to increase the size of currency price fluctuations. These factors can be as great as 250:1 in the FOREX market, and since it operates on deep liquidity and around-the-clock time schedules, brokers have been able to make the leverage factor a standard in the industry. High leverage can be extremely risky to say the least. However, the brokers have utilized leverage in order to make the resulting currency fluctuations more meaningful and beneficial to FOREX traders.
The combination of high leverage and extreme liquidity has made the FOREX market an ideal financial arena that has enticed many investors and spurned extensive growth as a result. Currency traders have the option of opening or closing trades within a matter of minutes, or they can hold their position for months. Fortunately, because of the fact that the aspects of supply and demand are the determining factors of currency movement just like in the economy, their price cannot be manipulated to protect the investor.
There are numerous opportunities for any type investor or trader in the FOREX market, and trades can be started for as little as $300. This is especially true where the beginning investor is concerned. However, getting involved without doing any research is not recommended. With all the online investment tools available to the beginner, it is easy to gain an education and work on one’s skills at currency trading. Understanding the basics of currency movements is at the heart of success in this market, so that education is critical.
As the next step – read here about top Forex brokers online.