The U.S. dollar is one of the most actively traded global currencies in the Forex market.
Forex trading continues to grow in popularity with investors. Currency trading is now accessible to individuals through online retail currency trading firms. The Forex market has historically provided investment banks, corporations and central banks the ability to hedge their currencies against price fluctuations. Speculators, including hedge funds and other professional investors, also trade in the Forex market. Currency trading employs highly leveraged transactions, and use of leverage may not be suitable for all investors. Discuss any currency trading transactions with your financial advisor.
Instructions
1. The global currency markets are increasingly popular with individual investors, according to "Profiting With Forex: The Most Effective Tools and Techniques for Trading Currencies." The global currency market trades 24 hours a day. There is no central trading place, and transactions occur through many electronic channels. Individual investors usually trade as speculators try to capture currency price changes.
2. Gain an understanding of the global foreign exchange markets. Read the financial press and enroll in a virtual trading room or on an a virtual exchange. "Day Trading the Currency Market: Technical and Fundamental Strategies To Profit from Market Swings" recommends practicing the basics, such as enter orders, obtain quotes and check account balances to gain confidence as a trader. Speak with several account providers to compare their services.
3. Define the currency market or markets of greatest appeal at the beginning of your research. "Selective Forex Trading: Achieve 100 Trades in a Row" suggests learning how each currency trades. Though the currency markets can be volatile, some currencies, such as the U.S. dollar, historically trade in small increments. Many currency pairs trade at cents per day. For that reason, currency traders use leveraged, or borrowed money. For example, an individual trades $400,000 of currency, at 1 percent broker margins, using 100-to-1 leverage. She deposits only $4,000 to place the trade. When the trade moves up by only cents, she captures a profit that is often more than the equity deposit.
4. Discipline is key to the successful currency trader, according to "The Ten Essentials of Forex Trading." Forex traders must have a disciplined approach to trading. The same trade may quickly against the investor. Cutting losses at predetermined levels helps keep currency traders from losing large amounts of money.
5. Make transactions from your account from the privacy of a personal computer. Buy and sell at price quotations provided by your trading firm. Most retail Forex trading firms do not charge a commission to trade, according to "Getting Started in Forex Trading Strategies." The firm makes money on the spread between the bid and offer prices---the prices at which you may sell or purchase a transaction---and margin rates. The enormity of the market thwarts price manipulators. The Forex markets work according to supply and demand. Since the value of currency doesn't actually result in a profit or loss---prices fluctuate against other currencies---understanding the market requires a slight adjustment from other securities markets.
6. Join other global investors in the currency trading markets. The vast Forex market provides traders with liquidity and borrowed trading capital. The global Forex market trades about USD 4 trillion per day in 2010. Bloomberg estimates the market will expand to USD 10 trillion per day over the next decade.
