What is FOREX Investing

Quite simply, FOREX (FOReign EXchange) investing is where you buy or sell one currency against another, say USD (US Dollars) against EUR (Euros). Say an investor feels the US dollar (USD) will go up against the Canadian dollar (CND). He would purchase a lot ($100,000) of USD/CND at say 1.110 thus controlling CND 111,000. As he anticipated the USD gains on the CND and is now at 1.120 so he closes his position and now controls CND 112,000 for a profit of CND 1,000 or about $892.85 once converted back to USD.

All good and fine, but where can a small investor come up with $100,000? He doesn’t have to. Many brokerage will allow you to leverage at rates of 100 to 1 and even higher. So you put up $1000 and the brokerage lends you the rest to make your trade (buying on margin). There are even some that allow you to start with as little as $500 and even $250 and have leverage ratios as high as 200 to 1. And they also allow you to purchase smaller lots of $10,000.

A great advantage of FOREX trading is its hours of operation. It goes 24 hours per day starting on Sunday at 5pm ET ending on Friday at 4 pm ET. And there is a lot of volume and liquidity in the currency market making it very likely that you will be able to make your trade at the price you want.

But be forewarned, you can lose a lot of money if you are not prepared before you begin trading. But with some knowledge and practice there is plenty of money to be made in FOREX investing.

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