Friday, January 14, 2011, AM | 3 Comments
Forex is simply the abbreviation for the Foreign Exchange Market. It has also been referred to as FX in the trading world. For stocks, there are Stock Exchanges where stocks are bought and sold. Then you have Foreign Exchanges where currency is bought and sold. The big difference I see is that when you buy a currency, in exchange you must sell another one. The word used is concurrent. In another words, buying and selling must go in pair.
There is another market as well, known as The Futures Market. Futures trading essentially consists of trading in futures contracts and is done like any other financial trading including the stock market. The difference is that you don’t deal with individual shares but with contracts of enumerated lot sizes based on the specified amount of shares. Therefore, an understanding of futures contracts is essential.
We are always advised to diversify in stocks and bonds
However, very seldom I hear about investing in Forex even though it is the largest exchange market in the world. And the ads that I see online seem to be scams even though they may be as legitimate as anything in this world. I am the kind of guy who wants to be reassured of something before I plunge into it.
Every market at times is fluctuating, some more than others. Stocks more than most of us can afford. We have seen the recent nose-dive of the stock market and the bubble burst of the 2000-2001 time frame.
In each exchange market, you have to be either extremely knowledgeable to make some money or extremely lucky. There are folks who use their head (logic and solid data) than their heart (emotions) and they follow the market in a very specific way that only they (God forbid) understand.
In any market, if you stayed too long and forgot to get out, you may miss the opportunity of making some extraordinary profit. Among the known contemporary investors, Warren Buffett is one of the few who stays with his investment and apparently does not get nervous when the chips in the stock market are low, so to speak.
Back to the Subject of Forex…
Everyone is not aware of Forex and Futures markets. The stock crashes down all the time. It’s time to diversify in Forex and Futures markets. Even if the currency of a country is devalued, you still can make money. But if you are wrong, you could lose money too.
London has the highest volume of trading, capturing over a third of the market. New York and Tokyo come second and third. Foreign exchange is traded actively on the exchange, and currency trading has more than double the last 7 years.
In a Nutshell
Georgia Anderson, ya I know the same Ms. Anderson of the Playboy fame, has written a book called Technical Analysis for Daytrading of Forex & Futures. It’s written in simple English in layman’s words and is most understandable. Don’t her Playboy spread fool you. She is pretty with a smart head on her shoulder.