Financial crisis is defined as crisis in financial sector
and markets due to situations like bank run, recessions,
stock market crashes, currency crisis etc. Bank run is
caused when a lot of people withdraw their money from
a bank thinking that the bank will become insolvent. Recession
is caused due to gradual slowdown of economic activity
over a period of time, it is a state of economic depression
where people face problems related to employment, investment
and corporate profits. There are many theories about financial
crisis can be prevented but still there is frequent occurrence
of such crisis in some or other part of the world.
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The forex market is the place for currency
trading. Banks and financial institutions facilitate the
buying and selling of foreign currencies in foreign exchange
market. In foreign exchange one currency is exchanged
for another in order to enable international transactions.
It is a known fact that Foreign exchange market is the
largest financial market in the world; market liquidity,
transparency in market and fast order execution are its
major attributes. It involves trading between all kinds
of high profile financial institutions like banks, currency
speculators, government etc. There is a great variety
of international currencies that that allows foreign exchange
market to facilitate trade and investment.
Benefits
of Forex Trading
Forex trading has lots of benefits. There are many reasons
why many people all across the world prefer foreign exchange
market as a very important business opportunity:
Leverage is one of the most important components of
forex trading. It gives the traders the power to achieve
huge profits while keeping minimum risk. In Forex firms
leverage varies from 50:1 to 200:1. I.e. if you have $50,000
and the Forex firm offers leverage of 200:1 then a deposit
of $250 will allow you to buy or sell currencies worth
$50,000; this is how leverage helps people to deal in
high volumes.
Forex Market is extremely liquid; in fact it is the
most liquid financial market in the world. Due to liquidity
the prices move up gradually in small increments. With
liquidity comes price stability.
Traders too get better trade execution options. The Forex
market is hard to manipulate and transactions are easy
to open and close. Traders can instantaneously buy and
sell without getting stuck. Online trading options allows
user to make a setting that will automatically close your
position once the desired profit level is achieved.
The market is active from Sunday 3:00 PM EST to Friday
5:00 PM EST. i.e. its a 24hrs market, 5.5 days a week
where as the equity market executes from Monday to Friday
from 8:30 EST to 5:00 EST. So people around the world
can trade at time that is convenient to them.
Nearly all brokers offer commission free trading.
Forex trading offers profit in rising as well as falling
market, where as that is not the case with the equity
market where the profits are only related to rising market.
Investors aim to achieve huge profits from currency movements
with the help of Forex trading. Forex trading is always
done in pairs, suppose on March 21, 2009 exchange rate
for dollar and RS is 50.66. That means to buy $100 the
investor will have to pay RS 5066. If after a couple of
months the exchange rate goes to 53 then the investor
can sell $100 at the price RS 5300. When trading in huge
volume the profit is very high.
In financial crisis, trade on the currency that you know
would definitely increase in value relative to the currency
that you are selling.
For beginners here are some facts about forex trading:
It is not a get rich quick scheme. Although Forex trading
is the best solution in financial crisis, do not expect
profits overnight. Besides patience, right knowledge of
forex trading is also required.
Forex markets changes every second.
Right education and knowledge is essential for forex
trading
Forex markets are open 24hrs 5.5 days a week, if you
miss a trade remember that forex trading will offer plenty
of opportunities to make money.
Dont risk more than 10% per trade
Have realistic expectations
Initially start working under guidance of some one who
is experienced in handling forex trading.
Forex Trading checklist
Allow brokers only for transactions; take responsibility
of your trading.
Look for leverage that is at least 200:1
In order to have more profits, cost of doing business
should be less, look for tight spreads.
Use a convenient and reliable trading platform.
Identify your advantages.
Determine risk of each trade before taking any action.
Track your trading activity
There are many financial instruments that help in forex
trading. A spot transaction has a 2-day delivery option,
in forward transaction buyer and seller agree on the exchange
rate of future date, future transaction have maturity
age of 3 months etc. Other transactions include: Swap,
option, exchange traded fund and speculation.
Many forex trading software
are available in the market. Some of the well know forex
trading software are: Forex Autopilot, Forex Tracer, Forex
Killer, Forex Raptor, Silicon Forex, Forex Funnel, 10-Minute
Forex Wealth Builder, Forex Trading Machine, Forex Brotherhood,
Forex Roboteer, Forex Avenger, Forex Profit Code. These
softwares have given tremendous power to ordinary people
to trade in huge volumes of currencies with minimum investment.
It is mainly because of such softwares that forex trading
has become so popular.
Although one can make a lot of money through forex trading,
it should be understood that forex trading is not get
quick rich scheme. In spite of having so many advanced
soft wares one cannot be successful unless he invest good
amount of time in understanding the concepts of forex
trading.
