Foreign exchange has emerged as one of the leading market places for new investors, and it has attached a significant number of new traders. Forex is relatively new as compared to the traditional stock market but shows excellent potential as a trading platform. In the past few decades forex has established itself as one of the biggest trading hotspots in the world, amounting to one-third of the total international trade with 1.5 trillion US dollars as the market cap in a day while the stock market hangs at roughly 200 million US dollars a day. It came into existence after the appearance of the Bretton Woods Conference where 46 countries came together to establish the US dollar as a standard trading currency exchange against gold, but this didn’t last long. In 1973 this system was abolished, and countries resorted to deal in currencies as compared to gold. The foreign exchange market runs 24/7 and is not regulated by any central authority which means that this market allows buyers and sellers to come together via the medium of the internet, telephone and electronic media to exchange currencies with a broker as a middle man.
To be a successful forex trader, you need to begin with research. Research and information will prove to be your most excellent tool in this market. You need to be able to read and comprehend government policies as they impact the market and the economy. The government keeps making policies to keep the foreign exchange in check, and you need to use these policies to your advantage. You must follow business news very carefully and focus on news related to geopolitics, economic growth, monetary systems, tax laws and trade relations with other countries.
It would be best if you had a comprehensive trading policy and should adhere to it strictly. Keep market changes in your mind and be ready to formulate new strategies when needed. The market does not move in a similar pattern all the time; it keeps fluctuating and is prone to violent shocks and irregular demand patterns. In this case, a great strategy will not only save your investment but also put you in a better position to buy currency when the market is recovering from a crash.
Just like any other trading forum, foreign exchange is also prone to profits and losses, and a trader must be strong enough to handle failures and not lose patience. The forex market works as a double-edged sword, it gives the trader with a high leverage ratio of 50:1 which allows the investors with a possibility of earning very high profits, but at the same time, it provides them with the risk of incurring very high losses.