Are Online Forex Trading Web Sites to be Trusted?
Many investors are considering moving into the foreign exchange market, or Forex, but are online Forex trading web sites a trustworthy way to invest? Read on to learn a little more about Forex, and how to find a web site that you can invest in with confidence.
Forex has been around since the 1970s. President Nixon took the United States currency away from the gold standard when currencies started to fluctuate. Now, our currency is backed not by gold, but by faith in the government's ability to back the currency. This market has been around for decades, but it's only been available to the retail public since the 1990s. Initially, the market was only open to people who could put up between $10 and $15 million; this meant it was usually reserved for big institutions such as banks. The advent of the internet made it possible to open the market up to the general public as it was now possible to trade in smaller sizes that would be feasible for the average consumer. Forex trading is just the trading of money and it involves the simultaneous purchase of one currency and the sale of another. It determines how much money another currency can purchase. Different factors cause the exchange rates to fluctuate, but the rate is ultimately determined by the faith the world market has in a particular form of currency; this includes how stable the country's political climate is as well as the state of their economy, the consumer sentiment, and the direction of these rates on the charts.
To begin Forex trading, you don't actually have to exchange any money or set up a bank account in a foreign land. You simply need to set up an account with a Forex dealer, also known as a market maker. There's no commission for the market makers in the Forex market, but the market maker will charge spreads, which is the difference between the buy and sell quote. You will deal directly with the market maker, not a broker who will charge you a commission. The market maker will offer several currency pairs, and the investor will use the currency he put into the account to buy into the currency that the broker holds relative to the spreads. The market maker will then sell the buyer the currency in which he is interested at a price that's higher relative to the price that he will buy back the same currency from you for your original currency. This is the way that the market maker can make a profit. The spread will let the broker buy low and then sell high, so as an investor you should try to find a broker whose spreads tend to be on the smaller side.
If you feel you're ready to start Forex trading yourself, you should do a little bit of homework (I suggest free online Forex trading schools). Carefully read any reviews of the websites you're considering putting your money with before you actually invest anything. When you open your account, do so with a market that is well capitalized and well regulated. Ideally, your market maker will be regulated in the United States, the United Kingdom, Canada, or Hong Kong. These countries have the most stringent requirements for their market makers and they also have the best standards for regulation. You can find reliable, trustworthy sites to conduct Forex trading.