Forex Trading Beats the Inflation Index

August 19th, 4:00 pm by Brett Chatz

This post is also available in: Italian

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New traders in the currency markets will want to follow several basic steps. Foreign currency trading is risky, however, traders with capital and discipline will prevail. While large central banks and notable hedge funds can have a detrimental effect on the market, experienced traders look to the future, knowing the market eventually work to their advantage. A well-managed risk plan will soften the blow for any trader. As an additional bonus, foreign currency trading guards against inflation.

The Merits of Foreign Currency Trading

Forex Currency Trading is the largest market in the world with $1.9 million per day in average traded value. Anyone can participate. The Forex market includes all currency (cash) and is open 24 hours a day, five days a week. Currencies are traded in major cities ? London, Tokyo, Zurich, Singapore, Hong Kong, Frankfurt, Sydney, Paris and New York City. Currency traders buy and sell world currencies. It?s? typically tied in with banks and financial institutions, but individual investors are taking part in the trading to benefit from the currency exchange rates.

Steps for FX Traders

1. The first order of business for a new trader is to have another look at their savings, in order to determine whether capital is available for the long run. Experts recommend having? savings, low monthly bills or payments, and of course steady employment.

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2. New traders need to open an account that is specific to foreign currency trading. There are foreign currency trading accounts that require account holders to be in a high position with? huge amounts of leverage, which is borrowing from a broker to reach the desired level of trading. Mini or micro foreign exchange accounts fit the individual investor?s needs. Lower leverage is used and the risk factor is diminished.

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3. Forex exchange trading, in the long run, is a great counter to inflationary pressures. To lower the risk, investors buy currency futures to seal an exchange rate for the future sale and conversion. Monetary policy and derivative transactions (currency trading) hedge against rapid inflation. Short-term traders will not reap the benefits like long term traders. Foreign currency trading is meant to be profitable over the long term.

The Plus Side of Trading Online

Innovative traders with a global perspective are consistently successful at Forex trading. Timing is crucial, however experienced traders should ideally stay away from hurried or delayed decisions. Affirming their own knowledge of global economics and remaining assertive during financial transactions puts Forex traders at the top of their game. In every transaction, Forex traders are purchasing one currency relative to another.. Forex trading works in pairs, and the main focus is yield drives return.

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For example, a New Zealand dollar and Japanese yen pair work together. The New Zealand dollar has an interest rate of 8 percent, while the Japanese yen is at 0.5 percent. Trades are conducted via a point system. If a trader ?goes long,? the New Zealand rate pays 800 points to the trader, but the trader will spend .50 percent on the yen for the 7.5 return, or 750 points. Forex trading is more complex than this simple example, but traders should understand the main idea. The foreign exchange currency trading is more accessible today because of electronic technology. It?s an opportunity for investors, who can manage the risks to enjoy the rewards.

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Source: http://www.etoro.com/blog/forex-news/19082012/social-trading-beats-the-inflation-index/

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