Look Before You Leap - Why a Trading Education is Necessary
By Margaret Dorsey
Money can be made or lost on the Forex (foreign exchange) market, just like
the stock exchange. With the proper trading education, the investor learns how
to buy and sell at the right times, using various methods to achieve one's
goals.
The investor is, in most instances, looking for higher interest rates to
receive a greater rate of return on their investment, and adjusting the interest
rate is a method used by a central bank to ensure continued interest to trade by
investors.
The following are brief explanations of different types of currency trading:
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Forward transaction: To decrease risk, forward transactions are often sought
on the Forext trading market. In this type of transaction, money changes hands
at a predetermined future date. Transactions are set up by the buyer and seller
in terms of days, months, or even years. Regardless of the circumstances on that
future date, the transaction closes.
Futures: Similar to forward transactions, foreign currency futures also
involve standard contract sizes and maturity dates. Standardized and traded on
an exchange for this purpose, the average contract is roughly three months.
Interest amounts are usually included in these types of transactions.
Swap: The swap is probably the most common type of forward transaction. Two
parties exchange currencies for a predetermined length of time. They also reach
an agreement on when that swap will reverse - at a later date. Swaps are not
contracts and the transaction does not take place through an exchange.
The most common type of forward transaction is the currency swap. In a swap,
two parties exchange currencies for a certain length of time and agree to
reverse the transaction at a later date. These are not contracts and are not
traded through an exchange.
Spot: As indicated by its name, a spot transaction is for a much shorter
duration - two days. A "direct exchange" between two currencies, spot
transactions involve cash rather than contracts. Interest is not included.
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Though easy to understand in theory, it is most advisable that the potential
investor learn everything there is to know about trading prior to making their
first successful trade.
The world currency market is a highly fluid market. Conditions, positive and
negative, within countries has impact on the rate of exchange for that given
currency at any given time. Learning to properly trade in any exchange market
helps increase the odds of the investor's success. Forex trading education
should be of the highest quality, with ongoing support and mentoring. Practicing
one's trading skills in a safe environment provides an excellent training
education ground before one decides to jump into any trading arena.
As evidenced around the world, trading in the world currency market can be
very lucrative, but as this article demonstrates the different choices and
methods must be learned to offset financial risk.
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About the Author
Margaret Dorsey has over 35 years experience in the legal field. She is been an active member in the Forex Trading Education community. She enjoys helping others develop and hone their skills. Her firm belief is anyone can be an accomplished self-starter and develop multiple streams of income.
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