Playbook #091: Forex / Currency Trading
🖼️ The Big Picture
If you have an eye for predicting future trends, a strong will, and a good poker face when there’s a lot of money at stake, then forex trading might be for you.
Foreign exchange trading, or forex trading, is simple… but not easy. In a nutshell, you’re buying one currency and selling another, betting that the currency you buy will go up in the future.
The forex market is the largest and most liquid asset market in the world, which shouldn’t be a surprise since there are 170 currencies worldwide. It’s open 24 hours a day, 5 days a week.
What happens here impacts everything from the cost of exports to how much it costs to travel abroad. For instance, if the U.S. dollar strengthens, like we’ve seen as the Fed has raised interest rates, then it becomes cheaper for Americans to travel to Europe.
Conversely, it makes it more expensive for everyone else to travel here, which can negatively impact our tourist economy.
The spot market is where the majority of action takes place (as opposed to the forwards and futures markets), and it’s what people usually mean when they talk about trading forex. Currency “pairs” are exchanged in real time, and prices are set by supply and demand.
And with leverage up to 400:1 available to some traders, you can really lever up for big gains… (or big losses). But when it comes to predicting currency values, there’s a lot to account for: interest rates, central bank policies, economic growth, political environments, and much more.
It takes a lot of research, foresight, and emotional discipline to succeed with forex trading, but there’s also a lot of money to be made. Let’s take a closer look at this opportunity.