Imagine a river, calm in spring and turbulent during monsoon, flowing perpetually. That is how the state of Forex rates is- liquid and volatile. Interestingly, it is the one of the biggest financial markets where currencies are exchanged in uncountable numbers. The best part about this business is, unlike other forms of trading where the give and take of assets and commodities actually take place, nothing is really sold or bought. Since the market is open to one and all, maximum pitching is done on behalf of individual retail investors. In other words, what is really exchanged is thought, expression and opinions of millions and millions of people like us who wish to voice their concerns regarding money.
How do you get started?
I have been a part of the league for a while. As anyone would be, I was clueless both in terms of currencies and investment. The idea of investing in an open market was both intimidating and intriguing. But without proper guidance, I would be nowhere no matter how much I am willing to pitch in as leverage. It was then that I stumbled upon an article online, which spoke about using social networking sites to gather expert opinions and strategies. There are websites designed especially for the purpose where millions of retail investors come together to discuss the currencies market. Since the business is practically open 24/7, the portal does not fail to update even a moment’s fluctuation in the movement of the green mint. If you have a clear concept about binary option, binary option strategy then it will help you to understand forex rate more easily.
The catalyst approach
While going through some of the nuances of this trade, I happened to skim through this phenomenon of the ETF (exchange-traded fund) or the ETN (exchange-traded notes). This could be your indirect approach into the business, without entering the futures or the currencies market. While the former enables you to monitor the performance of the paired currencies, the latter refers to payable debt notes issued by big banks based on the exchange rates. For a while, I was under the impression that this pseudo-hedging procedure was actually helping me minimize capital-gains tax incurred on profits. With time and experience, I realized that taxes could be levied on grounds of ordinary income.
So what if it’s an open market with seemingly lesser hazards? It does not account for zero risk. On the contrary, retail investors are prone to huge losses if the currencies move against them. As a fresher in investment, I made my first mistake: I opted for a higher leverage against the advice of my friends, with the justification that the market is unpredictable. This didn’t work out too well and I ran into losses on my first attempt. This is where I learned my first lesson: look for increasing your leverage gradually if you seek for sustenance on a long term basis. Proficiency comes with experience and that will prepare you to juggle with bigger numbers!
The most unfortunate thing happened with a friend of mine the other day. She had joined the bandwagon of liquid investors a month ago, only to get robbed by her fellow broker. The associate turned out to be a fraud who managed to sustain trading with utmost discretion- something my friend had absolutely no clue about. The next thing we know is all her funds got wrapped up with the broker’s office, with all her trading aspirations thrown out of the window.
To avoid such mishaps and minimize the authority of your broker, it is important that you seek a separate platform for this kind of trading. A plethora of providers is available online, giving you access to rate charts, strategies and market movements among other things. So make the most of what the IT generation has to provide and avoid the mistakes made by me and my friend in the process.