Forex Day Trading: Profitable Market, Practically Unknown
Until recently Forex Curency Exchange was one of the financial world’s best kept secrets. Since it is the largest financial market in the world, it should have been more well known, but it has escaped under the radar of most people, remaining the sole domain of the large banks, huge corporations and other financial entities that apparently did not like sharing their information with the world. Investors from all levels are hungry for new markets to sink their teeth into, and Forex (FX) is primed for their investigations. New investors are taking the plunge each day in record numbers.
Foreign Currency Exchange does not trade stocks, futures or options, rather it is the large market through which currency is traded. Unlike the stock exchange and other financial markets however, The FX market does not have a board or panel that governs its actions, nor is there any kind of arbitration process if someone feels that they were cheated by another trader. Members work things out pretty much on their own through word of mouth and credit type agreements- if you know you must rely on trading with each other day to day, it will behoove each member to do so honestly and fairly. Self-regulation is key to controlling the Forex. With our current financial crisis, one has to wonder how well self regulation works in the real world.
Forex day trading can be almost like a dream for the trader who deals with other financial products in other markets. Not only are there less governing bodies to deal with, it means less binding rules and regulations to pay heed to when making your trades as well. For instance, in the Forex world, there is no such thing as “insider trading”- if you know something either harmful or beneficial to the exchange rate of the Euro, then feel free to capitalize on that information at will. If you had equivalent information and were dealing on the stock exchange, that activity would get you in hot water to say the very least. But Forex day trading is not a simple walk in the park, even without the more stringent rules in place. Forex trades nearly two trillion US dollars per day from Sunday evening to Friday afternoon. That is twelve trillion dollars per week, six hundred and twenty four trillion per year. Wow, that is alot of cash.
Before you get the mental image of Forex Curency Exchange day traders walking up to some building with wheelbarrows full of wadded up cash ready to exchange, trade or sell, you should understand a few things. The the FX market technically sells “nothing”. Trades are done by computer, and may be described best as a “speculative market”. The market exchanges one currency type for another, for different reasons based on business need, for example, payroll in a multinational corporation. Another thing you might consider, especially if you are thinking of Forex day trading as a way to diversify your portfolio, is that currencies always trade in pairs and the insiders will refer to one as long and one short. The long refers to what you have, the short to what you want to have and once the trade is complete can be expressed in the reverse. There are no commissions paid on the Forex, but the brokers profit on the difference between the “Bid” and “Ask” prices, also know as the spread.
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