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The foreign exchange trade & commodity trade
The foreign exchange trade, also called forex trade, is the most liquid and the most dynamic market of the world. There is only traded with currencies, the most important are the US dollar (USD), Pound sterling (GBP), Euro (EUR), Swiss Francs (CHF) and the Japanese yen (JPY).It is possible to deal round the clock.
The forex market is a big finance, where the currencies are mostly traded by Internet brokers. The incredibly huge liquidity and volatility enables high profit margins. This market beats with a daily turnover of 3 trillion US dollars even the largest stock market NYSE. This has an annual turnover of “only” 10 trillion US dollars.
How will FOREX be traded?
The principle is quite simple - currency pairs will be purchased e. g. EUR/USD. The result is the formation of exchange relationships, the value of the pair can be expressed in relation to the other currency.
The financial leverage effect is the appetizing appeal
If you want to move e.g. 100.000 EUR on the forex market, it is not necessary that the capital of this value is available. A higher value can be traded due to leverages. Many online brokers offer you a various number of leverages, mostly 1:50, 1:100, 1:200 and 1:500. The gain per inserted Euro can reach the value x 50, x 100, x 500. Do not forget the loss; the biggest appeal of forex is the biggest risk at the same time.
Here a small calculation example. We have leverage 1:100 and insert 1,000 €. We buy the Dollar at a stock exchange price of 1.450 and sell them at a stock exchange price of 1.4550 respective to the Euro. The profit is also 50 pips (the last digits of the exchange change). For this reason we had the possibility to earn 500 €. The gaining is enormous. But how would it be, if the Dollar rate would fall? The leverage would be the same, that is, the loss would be 500, 00 € and our opening capital would be divided. A wholesome risk management at the forex trade is needed; otherwise you can loss your money quickly.
Foreign exchange trade is also possible with a small purse
A chance to get independence? The relative low seed capital is a particular feature for the foreign exchange trade. E. g. some forex brokers offer the trading for 50 US-Dollar or even less. Nevertheless due to the leverage a large value can be inserted. In this manner some people try to earn money with targeted investment on the forex market. Previous to the step to the independence it is advised to learn all basics and to test them. This can be done by the test accounts, in which you can trade realistically, but only with virtual capital.
The commodity trade – hard or liquid?
Another interesting field on the financial market is the commodity trade. Here you can buy and sell raw materials. This is the hedge against e. g. rising petrol prices.
The raw materials are traded as futures, options or forwards on the commodity exchanges. It is also possible to deal via the cash market. Some bourses are specialised to a certain commodities e. g. the Metal Exchange in London is oriented towards base metals and the Chicago Board of Trade is trading with metals and grains.
Risk Warning
The trade with foreign exchange and commodities (for example, via CFDs) is a high risk for your capital. We advise only to speculate with currencies you can accomplish its loss. These products are not suitable for all investors; please make sure that you have fully understood the risks. If necessary, we advise you to ask for an independent advice. Investment successes in the past do not guarantee successes in the future.
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