Foreign Exchange (forex trading) is an online, global market where central banks and large corporations buy blocks of currency (usually in lots of 100,000 units) for 24 hours a per day, save on weekends. Since the mid 1990s, it’s been possible for small investors to get into the act as well.
And therein lies the rub. Trying to stay on top of a forex position requires constant monitoring. Fortunately, there are automated tools that will let you specify a currency, an asking price, and a selling price. Combined with a brokerage account (so that you don’t have to put in $100,000 in seed money, but can get your funds aggregated with other investors), these can provide a reliable automatic forex trading system that will manage your purchase and sell orders, whether it’s 4 AM or 2 PM your time.
The key to making money at forex trading comes from one of three different strategies – buy-and-hold positions (where you buy an amount of currency, and hold it in an interest bearing account, selling it off when the price of the currency it’s held in reaches the price you want), derivatives (where you’re insulated from volatility, at the expense of a lack of agility to move on a rising trend) and day trading (where you’re buying and selling currency multiple times per day).
All of these rely on a unit of measurement called a “pip” – think of a pip as being 1/100th of a penny in dollar terms, and represent the fluctuations of the currency market. Pips can literally change every 15 seconds, and getting your buy or sell order in at exactly the right time can result in substantial amounts of money changing hands. Automated forex system trading lets you program in specific buy and sell thresholds so that you can focus on strategic trends and research, rather than constantly riding the minutia.
Some trends worth watching when doing foreign exchange trading are changes to prime lending rates, or raising the liquidity thresholds in certain markets. Drops in a prime rate tend to reduce the asking price of a given unit of currency, because it’s easier to take out a loan, and increases the amount of money in
circulation. Other trends to watch are wars – during the run up to the war in Iraq, the Euro went from $0.81 cents each to $1.41, before settling back down to roughly $1.25, where it’s remained stable ever since. The trick is to look at the news, and make a good hunch as to how it’s going to impact the forex market, and then set your automated forex trading system to capitalize on it, even if you’re soundly asleep.