This is a great question because you may find the answer to be “no” unless you are a big trader and have the ability to get rich quickly. But before we get onto that I want to start with some definitions. If you are interested in learning more about terms and definitions then you are in the right place. I will be writing a different post on a topic of this nature later this week. We will start here now and get to the important, the basic answers.
What is Forex?
For those of you who don’t know who Forex is, it is a currency related to stocks and shares, especially currencies, commodities, and gold (as you will soon see). Most Forex is traded as a futures contract, which is to say an exchange that is able to trade futures contracts of a predetermined period at a stated price and to receive a certain amount of the trade profit (in Forex currencies) in the future, in the form of a basket of commodities.
To understand a simple case, let’s say you buy a $100 forex contract that pays 1 x $100 in dollars to be traded in 2 months. Let’s assume that this price is $101 and you do the math. $100 x 1 year = $10,000. At that price, $10,000 goes to your broker but nothing in your portfolio goes to the forex center. $10 000 goes to the brokers, not to Forex center, who in return receives another $10 000.
This simple scenario illustrates some basic rules of Forex. For a long term trader it is important, that Forex traders can understand where they are trading and are able to identify the right Forex contract. But it is even more important if you are just making your living, as you might be unable to use your broker’s trade knowledge.
Why is Forex so expensive?
If you do it for a living you probably know that $10,000 can’t get you anything when it comes to your portfolio. But that is not what happened with this example.
Forex contracts are traded by a few large brokers and they don’t pay a lot of commission (as much as a broker that pays $400 to $500 every day is charging you!). For these large brokers the most important thing is to get their clients profitable, which is why they have to increase their price and cut their commission. I think a broker that is not charging a lot of commission, will
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