Forex Trading And How Your Portfolio Can Benefit

Forex trading can be done in so many different forms and for various reasons that deciding where to start can be a big task

. Do you need to start an account with a brokerage specializing in this type of trading , or do you want an account with a brokerage that lets you trade futures, stocks, options, and more ? Not only is this an overwhelming decision , you then need to decide whether to use your FX trading as a hedging or speculative tool, conservative or aggressive, short or long term, and more . Before you start there are definitely many things to consider .

While the questions posed in the paragraph above are enough to illicit a multi-volume response , in this article we're going to focus on the basics . The best way to get comfortable with the FX trading world is to go ahead and open your account with a fx trading specialist brokerage . Which broker should you go with? That is a topic that is better left for another article. Just ensure you do some research before you deposit any money !

Now that your Forex Trading is operation and you have things running, you need to get a firm handle on what exactly it is you're participating in . With our example, we suggest that since you started with an account with a specialized broker , you are going to be starting out by trading spot contracts or cash contracts . Without turning this into something complicated, this just means you are trading the current price as it is in the market at that moment . If the Eur/Usd pair is trading at 1.3200 on your brokerage screen that means that you can sell Euros against US Dollars at that rate or at this rate you can purchase US Dollars and sell Euros . There is a small spread built into that price you're seeing and when you take the trade this will be the cost of entry. Try finding a broker that only has a spread of 2-3 pips and no more.

Since speculating can be quite challenging at times , even for those that are professionals, let's say that you are starting out with the goal of hedging your stock portfolio in the United States . Because U.S. Dollars is the denomination of your stock portfolio you may make money if your stocks go up in value in US Dollar terms but your gains can be cancelled if the US Dollar weakens. So, you want to hedge that aspect of your portfolio and have decided to buy Euros against US Dollars in your brokerage account . This way as the US Dollar gets weaker against the Euro and your stock portfolio is suffering as a result of the generally weaker Dollar , the downside risk is hedged because of the gains you get by buying the Euros .

This is probably one of the simplest and best ways to add a forex trading component to your portfolio . Other articles in the future will discuss more about global market speculation methods that are more advanced, but this gives you a great place to start out.

Forex Trading And How Your Portfolio Can Benefit

By: David F. Dacosta

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