Forex Trading Systems
Forex or foreign exchange is presently one of the financial buzzwords. We hear and read about it more and more these days. Even web pages display advertising banners on forex. Commonly hailed as the world’s largest financial market where over US$ 3 trillion can be traded in a single day, the potential investment returns it can generate exceed that of stocks and futures.
Forex is simply a currency market where currencies are traded and prices are determined by prevailing exchange rates. Trading is done in the form of currency pairs, where transactions mainly involve the major currencies such as the euro, US dollar, Japanese yen, British pound and Swiss franc. The currency pairs are advertised showing the value of one compared to the other and the trader buys or sells a currency pair. Profit is made when the value of the currency bought rises against the second currency. On the other hand, if the currency bought loses value against its pair, the trader loses.
In the past, trading was solely the territory of central banks and trading institutions. However, technological developments have led to the evolution of web-based applications that has made it possible for individuals to participate in forex trading. Now, it is not uncommon to hear about small traders making investments in foreign exchange.
Just like any other investment, putting money in forex involves risks. Without the knowledge and experience that the banks have, an investor needs to know as much as he can about the market to be able to make good decisions on which currencies to buy and when to buy or sell them. Identifying opportunities need some form of technical analysis to predict the behavior of the market. Fortunately, there are now tools available to help investors in this aspect.
Although considered as just a tool, a good trading system is nevertheless an essential one and can make good profits for the trader if used appropriately. There are several forex trading systems or platforms the trader can choose from. The more popular ones range in price from US$80 to US$100 and each one varies in the analysis techniques, tools and styles used. Brokers also provide free trading systems for their clients but most of these are basically underdeveloped and sometimes, the features are not sufficient for the needs of the trader.
In choosing the right system, there are issues to be considered. In the very volatile market of currency trading, a system that is not too complicated would be more robust since fewer rules are required to generate market signals. With fewer parameters to take into account, the system can easily adapt and cope with the rapidly changing conditions. Further, it is easier to implement and more understandable to the user.
Systems can be web-based or desktop-based. Those installed on desktops are more prone to viruses and security intrusions, which may put personal and financial information at risk. In addition to being more secure, web-based systems are more accessible, since one can use it as long as there is an internet connection. These are just a few of the concerns that need to be addressed when venturing into foreign exchange but giving them enough consideration would help the trader in making his endeavor more profitable.