I have enjoyed trading options for many years, but a few years ago I got interested in trading foreign currencies or forex as it is commonly called. There were several things that made trading in the forex attractive. One of those advantages was the leverage that you are able to trade forex with.
One aspect of leveraged forex trading is trading in up to a 400 to 1 purchase power. What this means is that for every dollar that you actually put into the market, you are controlling 400 dollars worth of currencies. As you can imagine there can be huge advantages to using this kind of leverage. Of course as with any leveraging tool, it can and sometimes does bite both ways. Let me explain.
What 400 to 1 leverage allows you to do, as I said before, buy or control 400 times the money that you actually have in the market. The really power aspect of this feature is that if you currency pair goes your way only 1 penny, you profited 3 dollars, with only 1 dollar in the trade. Wow, that is an awesome return on your money to be sure. Now let’s get to the downside though.
you see for every action there is an equal and opposite reaction, so to speak. So what if your currency pair doesn’t go your, but goes against you by only one penny. Well, in a case like this you are down four dollars, and you only put one into the trade, ouch! Here is where you need to have enough money in your account to absorb these tendencies to dip below your break even threshold. To say the least trading currencies can be an amazing roller coaster ride of sorts because of this.
I have spent many hours at trading conferences talking to other trader, or rather trading war stories with them. One time we got to talking about our best or at least most exciting trades. It was fun to listen to many traders talking about making upwards of 40 thousand dollars in a matter of a few minutes. Truly, it is invigorating to hear these stories.
As with any conversation like this the subject soon turned to “What was your worst trade ever?” Talk about entertaining and heart wrenching all at the same time. there were many stories of losing many thousands of dollars in minutes, and sometimes even seconds. One that sticks out in my mind was a story of a trader who had entered a trade and was watching it closely for his exit points, either at a manageable lose or, ideally at a profit. Well, things were relatively slow, so he decided it would be OK to go to the kitchen to get a cup of coffee, and when he returned he was a very sad person. In just those 2 or 3 minutes that he was not monitoring his trade he lost over 67 thousand dollars. Talk about an expensive cup of coffee.
If you interested in some exciting trading adventure currency trading may be of interest to you, but if you want to make money trading forex, that is possible as well with proper due diligence and care.
Philip Kempf has been writing articles for over 10 years. you can see some of his latest at Mini Ductless AC and this one in particular you may find interesting Ductless Heat Pumps.
Could currency trading create a billionaire in his/her early 20s?
I want to know in your opinion if you think that currency trading could create a billionaire in his/her 20s, and if you think that some MBA student fresh out of uni in his/her early 20s if they are clever enough could achieve billionaire status as such in their early 20s?
Ok so you might find the next few links interesting. These are from around the web, just random snippets that I’ve picked up in my reading, but I found some very cool information in them. You might too. Here goes…
Mind, Method, and Market CD with Mike Mc Mahon
Belief Systems and How they lead you AstrayWhy 'Self-Reliance is the only answerHow your subconscious works your trades invisiblyControlling your Emotions.
Dollar, Yen Gain on Bleaker Economic Recovery Outlook
Dollar, Yen Gain on Bleaker Economic Recovery Outlook The Dollar and Yen gained against the EUR and other higher yielding currencies Thursday on concerns about the sluggish pace of the world economic recovery.
For forex tips there are a few that I have come up with that would help out the new trader. Trying to make a trade in the forex market without doing your market research is like gambling. A gambler makes a spontaneous move for the fun …
Hope you enjoy the read as much as I did and please if you have something to say, use the comments form below to let everyone know your thoughts.
Have a great day!
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