There's Money To Be Had In Forex Trading, But It's Risky For A First Time Investor

There's money to be had in Forex trading, but it's risky for a first-time investor

Forex trading is done on a much greater scale than any other kind of market in the world.
Some 1.9 trillion dollars are handled every single day. About 73 percent of all Forex
trading is done by 10 international banks with names you're familiar with: Merrill Lynch,
Citigroup, and so forth. National banks and other financial institutions account for
another chunk of Forex trading, and transactions by "day traders" -- regular individuals,
people like you and me -- account for only 2 percent of all trading.

Nonetheless, many average investors do try their hand at Forex trading, and there are
many financials institutions who handle such transactions. It's known as "retail Forex,"
and it's handled much the same way that day trading of stocks is handled.

The downside is that unlike the stock market, the Forex market is not particularly well
regulated, and people inexperienced with it can be taken advantage of. The U.S.
Commodity Futures Trading Commission (CFTC) gives several bits of advice for
amateur Forex traders. Among the CFTC's tips:

- Avoid companies that predict or guarantee large profits, or that promise little or no
financial risk. There is ALWAYS a financial risk in Forex trading, and no one can
guarantee profits when it comes to speculative endeavors.

- If someone won't give you his background, don't deal with him. Likewise, always
check out a company's track record before doing any trading with them.

- The Internet is a haven for shady types. Be wary of anyone wanting you to send cash.

- Above all, remember that if an opportunity sounds too good to be true, it probably is!

There are plenty of honest and reliable Forex trading firms out there, including ones that
operate online. But even if the trading company is legitimate, there are still risks inherent
in trading. Because currency rates can fluctuate for such a variety of reasons, it's difficult
to predict what investments to make. Even seasoned professionals get blindsided
sometimes.

In short, Forex trading can be lucrative, but only if you know what you're doing. Before
embarking on any investing, study the details of how the market works, what causes
fluctuations, how to interpret financial indicators, and all the other ins and outs of the
market. Forex trading isn't something to be entered into lightly. There is much potential
for profit, but there is even greater potential for loss, both at the hands of unscrupulous
trading firms, and of your own inexperience.