Forex trading is done on a much greater proportion than any other kind of trading in the world. Some 1.9 trillion dollars are exchanged every single day. About 73 percent of all currency trading is done by 10 worldwide banks with names you’re familiar with: Merrill Lynch, Citigroup, and so on. Domestic banks and other financial institutions account for another chunk of forex trading, and transactions by “day traders” — regular individuals, people like you and me — account for only 2 percent of the total.
Nonetheless, many regular investors do try their hand at forex trading, and there are many financials institutions who handle such contracts. It’s identified as “retail forex,” and it’s handled much the same way that day trading of stocks is handled.
The downside is that unlike the stock market, the forex market is highly unregulated, and people inexperienced with it can be taken advantage of. The U.S. Commodity Futures Trading Commission (CFTC) gives several bits of guidance for novice forex traders. Among the CFTC’s tips:
- Avoid companies that predict or guarantee large profits, or that promise little or no financial risk. There is ALWAYS a financial risk in forex trading, and no one can guarantee profits when it comes to speculative endeavors.
- If someone won’t give you his background, don’t deal with him. As well, always check out a business’s track record before doing any trading with them.
- The Internet is a haven for dubious types. Be suspicious of anyone wanting you to send cash.
- More than anything else, keep in mind that if an opportunity sounds too good to be true, it probably is!
There are plenty of decent and reliable forex trading firms out there, including ones that operate online. But even if the trading company is legitimate, there are still risks intrinsic in trading. Because currency rates can fluctuate for such a number of reasons, it’s difficult to forecast what investments to make. Even experienced professionals get blindsided at times.
In short, forex trading can be profitable, but only if you know what you’re doing. Before embarking on any trading, study the details of how the market works, what creates fluctuations, how to interpret fiscal signals, and all the other ins and outs of the market. Currency trading isn’t something to be entered into without due consideration. There is much potential for profit, but there is even larger potential for loss, both at the hands of crooked trading firms, and of your own lack of experience.
Don’t spend any money on automated forex trading software before you take some time to learn about the many forex robot out there.
