| Forex trading Introduction -
January 22nd, 2006
# What is Forex trading?
* Forex trading is the trading in foreign currencies.
# Features
* Market is open 24 hours 5.5 days a week.
o Pros: One can trade in ones the late evening and early morning without disturbing core business.
o Cons: One tend to rob the time for family and friends, but then week end is there. Beware of not getting addicted to get glued the terminal.
* Forex market is most liquid, they say daily volume is more than $1.5trillion, many times more than the volume of all the stock exchange across the globe put together.
* Great leverage of as low as 50:1 to 200:1.
o Pros: One needs a relative less capital for a large exposure. For the exposure of $10000 you need only $100.
o Cons: One tend to over trade. Please refrain from it and apply due diligence.
* Commission or brokerage free trading.
o Actually its a catch because these elements are catered from the spread* as nobody can afford to give free lunch and sustain.
* No restriction on shorting.
o A great feature, as you can trade in both rising and falling market with equal ease without bothering for producing instrument.
* The trade can be rolled over at a relatively very small roll over fees.
* Not a very large number of scrips to scan to find a possible entry into trade.
o Though over 60 pairs* of currencies are trade, but primarily only about 5-6 pair is actively traded*, hence you need to concentrate on these few only.
* Market maker cannot manipulate the market.
o As the volume is huge no single or syndicate can manipulate the market which can easily be done in case of stock market.
* Forex market is very much amenable to technicals.
o Forex market is trending and you would agree that one can make money only in trending market only. (converse is also equally true unless the trade is taken with necessary study or advice)
How?
* You open an account with a base currency say US Dollar
#What is the minimum amount needed to open a account?
* You may open an account with as low as $250 only, i.e. Rs11352.5 (250*45.41) plus wire transfer or money transferring fees.
With so many attractive feature, why forex trading is not so popular in India?
*Till recently the participants were big corporates hedging their export/import requirements or large capital banks or even central banks of respective countries.
*There was restriction on investing abroad. Now with the change in law one can invest upto $25000
It's better to let someone think you are an Idiot than to open your mouth and prove it.
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