A forex trader, also known as a foreign exchange trader, is an investor who concentrates his or her portfolio on the foreign currency exchange market. A foreign exchange trader can profit from changing currency rates by closely following the currency market and making timely trades. A foreign exchange trader is often self-employed or works part-time to supplement his or her income. Expert forex traders can also be hired as consultants by investment firms or brokerages.
Many people who want to become day traders or have hands-on involvement in their investments are drawn to the exciting world of foreign currency exchange. Rather than investing their hard-earned money in the stock market or long-term bonds, a foreign exchange trader profits from day-to-day fluctuations in currency value. A foreign exchange trader must rely on market knowledge, a thorough understanding of trading software and brokerages, and a little luck to make consistent profits.
Before starting a trading career, a future foreign exchange trader will spend months or years learning about the market. Attending market seminars or reading books about the market, studying market patterns and common indicators in order to recognize patterns that can lead to great trades, and learning about brokerages and online forex websites that allow real-time market tracking and trading are all examples of this education. Many traders participate in market simulator experiments after learning the theoretical information. These experiments allow traders to test trading strategies on the real market without using real money.
A day trader can start making live trades for a profit once he or she has opened a live account. A trader uses his or her market knowledge to identify a pair of currencies to work with, such as Euros against the US dollar, in order to make a trade (USD). If a market indicator, such as the release of an exceptionally good economic report by experts, indicates that the Euro’s currency value will rise soon, the trader may sell 500 USD for 500 Euros. If the value of the Euro against the dollar doubles, the trader can sell the increased-value 500 Euros for 1000 USD, giving him or her double the money from the initial trade. A trader will frequently deal in much larger sums in order to make a significant profit.
A foreign exchange trader may choose to leave day trading for a job in the financial industry in some cases. Successful forex trading can help a trader qualify for a job as a broker or investment manager specializing in the foreign exchange market. Other credentials, such as college degrees and work experience, can better prepare a trader for this line of business.