FOREX 101: Make Money with Currency TradingWritten by Rich McIver
For those unfamiliar with term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in 1970's, when free exchange rates and floating currencies were introduced. In such an environment only participants in market determine price of one currency against another, based upon supply and demand for that currency.FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect price of a major currency. Furthermore, liquidity of market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers. Another somewhat unique characteristic of FOREX money market is variance of its participants. Investors find a number of reasons for entering market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to long term investor, combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies. How FOREX Works Transactions in foreign currencies are not centralized on an exchange, unlike say NYSE, and thus take place all over world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around world, there are dealers who will quote all major currencies. After deciding what currency investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading. Marginal Trading Marginal trading is simply term used for trading with borrowed capital. It is appealing because of fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term "lot" refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500. EXAMPLE: You believe that signals in market are indicating that British Pound will go up against US Dollar. You open 1 lot for buying Pound with a 1% margin at price of 1.49889 and wait for exchange rate to climb. At some point in future, your predictions come true and you decide to sell. You close position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in course of a day, an average daily change of Euro (in Dollars) is about 70 to 100 pips.)
| | How To Get Rich and Stay RichWritten by Jelani Khalfani
How to Get Rich and Stay RichHere are 10 strategies that are used by wealthy individuals to get and accumulate wealth. Use one or all to help yourself become rich. 1. Weigh every purchase based on a cost/benefit analysis. As fanatic savers, affluent constantly look for ways to reduce expenses and avoid spending money on high-ticket items that have little value or are merely status symbols. For rich, few items, are purchased without a great deal of thought. While they have no problem spending big on homes, vacations and their children’s educations, they are tightfisted about almost everything else. They always think in terms of alternatives. When shopping for cars, for example, affluent look at models that cost $60,000 and those that cost $10,000. Then, they may decide they can get most desired features for just $25,000. 2. Put discretionary money to work. There’s one thing that those who never have any money have in common-when they have discretionary money, they treat it as if it were a blessing. They usually spend it on merchandise that brings only temporary satisfaction. When rich come into money, they save it. They understand importance of allowing money to grow in order to keep pace with inflation. They also understand how easy it is to lose money, and they dread tha possibility.
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