Individual Speculators and the Popularity of Forex Trading

Forex stands for Foreign Exchange Market. This is where currency trading is conducted among large banks, corporations, governments and other large institutions. Beginning in the mid 1990s the internet made Forex trading available to individual speculators as well and its popularity has grown enormously ever since. Now about 95% of the trades are carried out by speculators.

The Forex market is probably the largest and most liquid market in the world. The trading day is 24 hours starting 5 p.m. EST Sunday through 4 p.m. EST Friday. Another characteristic that makes Forex trading extremely popular is the leverage available to individual speculators. With leverage of 200:1 the individual speculator can control trades large enough to earn significant profits and with mini contracts now available the individual trader is able to greatly reduce risk as well. The downside to the available leverage is that large institutional players are able to manipulate the market with huge transactions.

Nevertheless, it is possible for individual speculators to make large profits with Forex trading. To become a successful speculator one needs to become educated on the Forex market and the factors that impact the market. There are many factors that will influence the market, but it all boils down to supply and demand. The complex of elements that influence supply and demand can be divided into three categories: economic factors; political conditions; and, market psychology. Understanding and staying abreast of each of these categories is a difficult task but this is what it takes to be a successful trader. Not having adequate information regarding these three categories to use as bases for trades, amount to nothing more than wild guesses and/or pure gambling.

It takes time and effort to learn how to trade on the Forex market, but learning how can be well worth the effort. There are numerous free courses available on the internet from which to learn the basics. Also, a budding trader can open a free practice account where actual trades are simulated from a trading platform exactly the same as if you were trading for real. Simulated trading allows would be traders to try out strategies and techniques learned in courses and to become familiar with the trading platform, how to track trades and their performance, also, how to set stops and buys and to close trades. These trading platforms will also provide news feeds from around the world so that you can keep up with information that will affect the market on a real time basis.

Technical Analysis and Fundamental Analysis are the two basic techniques used to predict future directions or movements in the market. Technical Analysis involves analyzing past market data in order to predict future price movements. Technical analysts assume that; all market fundamentals are accounted for in price data; history repeats itself regularly and predictably; and, prices trends occur. Traders use price and volume charts along with other mathematical modes of market data to determine the best entrance and exit points for a trade.

Fundamental analysis focuses on the core elements affecting economies. Predictions of price action and trends are made by analyzing economic indicators, government policy, societal and other factors.

Most traders use a blended approach of both technical analysis and fundamental analysis. It is important to learn both approaches because at different times you may be relying on elements from either approach to a greater or lesser degree, few traders are purists in this regard. Once there is a basic understanding of both approaches a trader can decide which he/she prefers to emphasize, but a good trader will never totally ignore the other approach.

Learning to trade the Forex market is complex but exciting and carefully executed trades based on sound analysis can be extremely profitable and thus well worth the effort and anyone can become a Forex trader.