Just like trading stocks, any investor with an interest in world currencies can trade in foreign exchange. But how much about trading foreign currencies do you need to know?
The level of investor-related education you need before you begin depends on how you want to trade. Are you looking to buy and hold like Warren Buffet with his stock picks? Or do you want to make quick money day to day?
Your answer will determine what your trading style should be and how much work you’ll have to do.
Going In for the Long Haul
Just like traders who follow stocks and commodities, being a successful forex trader takes work, an understanding of world markets and government roles in markets that can impact the value of a country’s cash.
But because of our current economic environment, many retail investors have already been keeping up with the economies of other countries, says Betsy Waters, global director of dbFX, Deutsche Bank’s (Stock Quote: DB) foreign exchange trading Web site.
For trading information and tips, foreign exchange data and services company eSignal, a division of Interactive Data Corp. (Stock Quote: IDC) offers free forex trading strategies.
And for extra help, whether you’re a new forex trader or a pro, dbFX offers access to research from its analysts worldwide to clue you in on the development or potential downturns in world markets.
In the Short Term
If you’re eager to step up your game and you’re willing to do more research and speculation, day trading in foreign exchange is an option.
By analyzing technical data and fundamental analyses, you can identify trends in foreign currencies, and as with stocks, speculate on the future value of a country’s money by looking at stats and charts.
You can get general exchange rate information and economic indicators for the U.S. and abroad from the Federal Reserve Bank of New York. And eSignal offers free information on foreign exchange trading strategies that help you identify short-term and long-term trends and possible reversal of trends.