How to Trade Currencies
By Eric Hammer
If you've always wondered how to trade currencies and what
the whole Forex market is all about, then you've come to the
right place. Let's start with a few basic bits of information:
First, just what is Forex anyway? Forex is an industry term referring
to the trading of money from one country to another (FOREX is
short for "foreign exchange). The fact is that the value
of one countrys currencies as compared to other currencies
goes up and down based on a variety of factors.
While Americans don't tend to think about it very much given
that we have the U.S. Dollar which is considered a reserve currency
(a reserve currency is a type of money that other nations hold
on to in order to keep stockpiles of foreign money. The dollar
is by far the most common reserve currency in the world with
the Euro being the second most popular and then the British Pound,
Japanese Yen and Swiss Franc being used by very small numbers
of other countries). However, for people in most parts of the
world, the value of their local currency matters greatly, both
as a point of national pride and as a practical point, making
imports and exports either cheaper or more expensive.
The way the Forex market works and the topic of our discussion,
i.e., how to trade currencies, is quite simply that you sell
one currency to buy another, for example, you might sell $1,000
dollars and buy euros at $1.25 per euro (thus netting yourself
800 euros). If the euro then goes up in value to $1.50, you sell
the euros back and make a profit in dollar terms (your euros
are now worth $1,200 and you have a $200 profit). Of course most
currency traders tend to work at much higher amounts of money
than this and truth be told, most dont work in dollars
or euros, preferring instead to trade in more exotic currencies
that may show stronger swings, such as Brazilian Reals, Indian
Rupees or Israeli Shekels to name a few of the more popular currencies
for Forex trading.
How Much Can You Make?
Forex trading is very much like working in the stock market
or the bond market. You can make very, very handsome profits
in the hundreds of thousands and even millions of dollars if
you play your cards right and pick currencies that are about
to show a wild swing either up or down, however you can also
see tremendous losses for the very same reason. Most people who
do this full time do it not with their own money but as brokers
for people who want to invest in the currencies market.
If you do work as a broker, according to Salary.com, you can
expect your salary to range from around $112,000 per year to
as much as $228,000 per year. Traders who work with their own
money of course make as much as they make or lose as much as
they lose based on their own trades.
Ways to Make More | Related Opportunities
Forex trading often goes hand in hand with stock trading,
bond trading and futures trading. In other words, it's the sort
of work that you might do if you work in a Wall Street based
Investment Banking firm. Therefore, all these things are ideas
you may consider when learning how to trade currencies.
Qualifications / Requirements
You will need to have at least a bachelors degree in a field
such as economics, mathematics or statistics in order to become
a professional Forex trader. To do this on your own with your
own money however, all you need is plenty of money and a very
strong stomach (as the numbers can change quite rapidly and you
could make or lose a fortune literally in minutes).
It also helps to have a background in trading in general (stocks,
bonds, etc. any kind of finance background is helpful)
and you need to be able to make decisions in a snap. Forex traders
who decide to sit around hemming and hawing tend to lose fortunes
and get out of the business very quickly.
Start by going back to school (at least informally if not
formally). Learn everything there is to know about Forex trading,
including the terminology of the business, the ways that people
make money doing it (commissions from trades as well as actual
trades with your own money). Then, take the plunge yourself in
a small way. Be sure to stay disciplined and don't spend more
than you can afford to lose. Remember that this is a lot like
legalized gambling. You can make it big, but you can also lose
The Princeton Review: Forex Exchange Trader
A review from one of the most respected career guides
available of the business of trading currencies for a living.
Institute Another company dedicated to teaching you
how to trade currencies for a living. http://www.markettraders.com/
Forex.Com a research site for professional Forex traders.