Everyone has secrets. Each person locks away their most hidden secrets in hopes of people never finding out about it. Some people hide their secrets to prevent others from figuring out their weaknesses, while others keep it hidden to prevent a scandal. Whatever your reason is, there is always a secret hidden somewhere. And the same could be said about forex secrets.
Forex secrets sound like some easy money-making scheme that big institutions use to abuse the market. I can assure you that it is only partially true. You should never believe nor rely on those get rich quick schemes scattered on the internet. And with that, you should read this list to find out about the forex secrets you should definitely know.
Forex Secrets #1: You Don’t Own Physical Currencies When Trading Forex
Everyone has stumbled across a moneychanger at least once in their lives. You may have even used those moneychangers yourself. However, you should note that forex trading is significantly different in its process. Although the core concept of foreign exchange is similar, the actual trading could not be farther from it.
The major difference when it comes to forex trading is never being able to hold the physical currency nor see it. However, you are still trading physical currencies that is a given. But when exchanging currencies you do not need the actual physical cash at hand. What instead happens is all of your money is being electronically recorded online. And the e-records then calculate your profits and losses based on your trades.
Forex Secrets #2: Learn The Bid-Ask Spreads
Competition brings out the best in us. We hear that phrase all the time. And there is no place where that saying is truer than the forex market. The second you step foot in the forex game you will immediately realize just how competitive the forex spreads can be.
Forex spreads can be extremely drastic. An example would be that most money changers earn a spread of about $0.01 or $0.02 for every dollar traded, while the forex market spread can be as low as $0.00006.
Learning how to read the spreads is crucial because it greatly affects your profitability in trading. Although, every trade starts at a slight loss due to the spread they incur. Thus you should always try to go to the ones with lower spreads as they are easier to breakeven. And subsequently, you can have a higher trade profit.
Forex Secret #3: You Capture Profits From Volatility
Trading is a complicated beast. To trade successfully you will need to learn a lot of terminologies and tactics. However, there are a number of people who still don’t understand the difference between trading and investing.
Investing is buying an asset that you believe will appreciate in value on a long-term scale. However, trading forex is done through exchange rate fluctuations all of which is done on a short-term scale. Most trades based on exchange rates may not deviate much in the long-term. Although, you can still make profits if you are able to capture short-term volatility.