You don’t have to be a daily trader to take advantage of the forex market—every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange, or forex, market. In fact, the forex market is the quiet giant of finance, dwarfing all other capital markets in its world.
Despite this market’s overwhelming size, when it comes to trading currencies, the concepts are simple. Let’s take a look at some of the basic concepts that all forex investors need to understand.
Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. The following eight countries make up the majority of trade in the currency market:
- United States
- Eurozone (the ones to watch are Germany, France, Italy and Spain)
- United Kingdom
- New Zealand
These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most creditworthy and liquid instruments in the financial markets.
Economic data is released from these countries on an almost daily basis, allowing investors to stay on top of the game when it comes to assessing the health of each country and its economy.
How Can You Start Trading Forex?
If you’re still reading, your next question is probably, “How can I become a successful Forex trader?”
This is the main focus of the rest of this article – we’ll outline not only how you can start trading, but also some of the most popular trading strategies for making a profit on the Forex market, which exercise risk management. The first step, of course, is getting set up to trade, which starts with finding the right Forex broker.
7 Questions to Ask to Find the Right Forex Broker
When it comes to choosing a Forex broker, it can often feel like an overwhelming choice, with countless options available. Here are the top criteria you should consider when making your choice: