Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Forex Trading: The Marketplace of the Future

Tuesday, 24 July 2012

Forex Trading: The Marketplace of the Future

(Image By The Dilly Lama fia Flickr)
Guest post by Sara Mackey

Since the complete implosion of the modern financial system in 2008, the global economy has undergone significant changes. 

Not only did stock exchanges around the world lose over 50% of their value in a matter of months in the fall of ’08, but global assets have developed correlations and movements that are very difficult to predict with traditional investment models.  This massive shift in global asset pricing and instrument correlations has caused scores of hedge fund managers to retire because of the difficulty in predicting and understand the current and future economic landscape.

Young Is Good

The most poignant advantage to jumping into financial markets now, as a university student, is that one does not have to unlearn decades of past experiences in order to make sense of our current global landscape.  Instead, the new norm becomes one’s only norm.  And that is a powerful advantage.  Many uninformed investors may attempt to put forth the argument that there has never been a worse economic time in the U.S. since the Great Depression.  While that may be true in a statistical sense, it may also be argued that this is actually the best time for younger professionals to begin the investment journey; primarily, because current volatile global markets will eventually stabilize, and a bull market will come once again, and when it does, those who pick up essential trading and investment skills now, will be positioned with massive advantage when the next secular bull market hits in the next 3-5 years.
Global Markets

The most exciting market in the world is the foreign exchange market.  Not only does its immense size dwarf all other financial markets combined, but it is also the most macro of any asset class.  Commodities and stocks, at times, may be driven by large macroeconomic developments, but typically those assets tend to be driven by more micro factors such as specific sector developments.  Currencies, however, are different.  They tend to exclusively be driven by macroeconomic themes such as interest rate movements, relative economic growth, and inflationary concerns.  If one enjoys big-picture analysis and macro geo-political themes, there is no better market to trade than currencies.
How To Get Started

Accessibility to the foreign exchange market was once limited to investment banks, large hedge funds, family offices, and very wealthy private investors due to minimum contract sizes of $1 million.  Today, however, the advance of technology and the internet has resulted in the emergence of the online retail forex world.  Now, traders can open an account with as little as a few hundred dollars and begin placing bets on the future relative movements of one currency versus another.
Furthermore, every online broker provides prospective clients with simulated accounts; thus, an aspiring trader may practice on real-time pricing feeds with fake money.  This is very advantageous during the learning curve.  Successful trading tends to depend on three primary areas of development.
 
 
1.   Strategy Development
2.   Risk Model
3.   Personal Psychology
It is best to take a period of months to research and test various strategies in order to find one that suits one’s own personality.  Then, the next step is to construct a model to manage equity risk by determining how and when to get into a trade and out of a trade.  Finally, personal psychology is what empowers a person to successfully execute a strategy and risk model on a consistent basis.

Although conventional thought may be tempted to proffer that current global uncertainty is too high and this is a bad time to get started in the investment world, the reality is there has never been a better time that right now. 
For more information on Forex markets, click here. 

The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed, neither the information presented nor any opinion expressed constitute a solicitation of the purchase or sale of any forex, futures or commodity product. Those individuals acting on this information are responsible for their own actions. Forex, futures and commodity trading may not be suitable for all recipients of this report. The risk of loss in trading forex, futures and options can be substantial. Each investor must consider whether this is a suitable investment. All recommendations are subject to change at any time. Past performance is not a guarantee of future results. Please Note: All performance figures and illustrations were obtained using historical back testing on a computer and are not the results of an actual account. No guarantee is inferred that future performance will be like the results shown. Futures, forex and options trading involve risk. There is a risk of loss in futures, forex and options trading.

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