Wednesday, March 13, 2013

Currency trading can provide a significant source of income for some professional traders. But for other investors, foreign exchange transactions are simply an additional source of income that allows them to invest their hard earned money. With the growing popularity of currency trading, more and more individuals seek to use forex trading as an alternative investment vehicle, in a sense replacing stock market trading.

There are several types of traders in the foreign exchange market:

1) The first type of trader is the full-time professional trader. The majority of these traders are day trading, they invest in the Forex on a daily basis and are sometimes scalpers who profit from small movements of currency pairs using high leverage. These seasoned traders have extensive experience that allows them to develop effective forex trading strategies.

2)  The second type of Forex trader does not really have time to do forex trading on a daily basis. These investors either do not have the time to monitor the financial markets themselves or are essentially long-term traders who wage their “bets” on large forex movements. They do not really care about small foreign exchange fluctuations and trade with little leverage.

3)   The third type of forex traders are slowly emerging in the world of forex investing, they prefer to let managers manage their accounts for them. These investors do not have time to study the financial markets themselves, but are well informed about the possibilities of profit or losses that may quickly occur in the forex market.

There are other types of traders who are not in the list because they are not individuals, such as hedge funds, brokers or hedgers who protect themselves to ensure a fixed price for their productions.

If you are interested in investing money in the forex market, make sure to set clear investment objectives. You must not only determine the amount you are willing to invest, but also the time that you can afford to devote to the study of trading. Your psychological profile and personality must determine your trading style.

Before you begin trading, you should make a short checklist containing, at the very least, the following:

1) Define your trading strategy (hedging? scalping? trading with the trend? trying to identify tops and bottoms?)

2) find a broker that meets your requirements (for example, you may want a broker that allows scalping, or that allows you to trade mini-lots, or that lets you trade metals and commodities as well as currency pairs) and

3) make sure that the broker is licensed and accredited by a regulatory body (for example: the FSC in the Republic of Mauritius).

John Carricaburu –

source : HotForex

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