Forex Trading Is for the Serious Only
By: ajeetkhurana | Posted: 21st January 2008
FX was the operational word. When I was studying to be an MBA in Information Systems and Finance, I came across the wondrous world of FX. Which is a fancy term for Foreign Exchange. Old timers keep insisting on calling it currency.
That this market presents to many unwilling bed-fellows is an interesting tidbit that gets traders excited. Compare that to the stock market where everyone is a willing participant. In the marketplace for foreign exchange, there are players such as banks that need to participate, as they have to clear international deals and international currency transactions.
This creates a huge market of opportunity for the traderr. Like in any moderately sophisticated trading floor, the objective remains the same: find deals that can rapidly be converted into winning positions, usually within the day. This need to square off within one day is especially felt as there is a serious cost of carry and that margins need to be marked to the market at the end of each trading day.
To give you an idea of what we are dealing with here, let me point out that there never really is an end to the day of the currency market As the earth rotates, there is someplace somewhere on the globe that is just encountering sunrise at any given point of time. All the same, there are a few major markets, London being at their center, where currency deals take place in the largest numbers.
Back to trading related discussion: foreign currency dealers are constantly on the lookout for situations where the pigs, i.e., people who must trade, will somehow subsidize their trade and help them turn a neat little profit.
This piece of wishful thinking has made many a trader's life unhappy, but at the same time, I know of dozens of rather disciplined trade-professionals who have built themselves a neat little fortune trading in these Dollars, and Pounds, and Yens, and Euros, and Rupees, and Cruzeros, and god alone knows what other currency.
Do not homogenize all the dollars of the planet. Are we talking about the dollar from the United States of America? Or is it from the down under Australia? Or is it emblazoned with the roaring lion from Singapore?
As you can see figuring out the direction that a currency will take is not easy, primarily as it eludes the pedestrian logic that people will tend to use when stick picking. This does not mean that exchange rates cannot be forecasted. For instance, I am writing this article at the very end of 2007. I can bet that the Indian Rupee will continue to secularly rise against the US Dollar for the next few years, say at least for the next three years.
Every person is a soothsayer in this market, and I am not under any illusion that I will be making pots of money any time soon Well, the rise is going to be so little and over such a long period of time, that I will not be able to make any real trading opportunity based on my forecast. And if you are reading this, please note that I am not giving you professional advice, but rather, thinking aloud.
I hope that this article has given you some food for thought on forex trading.
Want to know more? I recommend the forex trading blog. Regularly updated Market Wrap helps make for some easy forex trading.
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Tags: huge market, old timers, foreign currency, currency market, fancy term