Lately, there has been much talk about the Brexit and volatility in the forex markets. Even though the financial fallout wasn’t as ominous as initially predicted, many investors see this new environment as a great opportunity to make money trading. Forex trading for beginner investors can be a bit intimidating, but here’s what you need to know.
Volatility in forex markets can sometimes represent risk and uncertainty. However, high volatility can make forex trading attractive to day traders looking to make a small, quick gains in their brokerage accounts. These assets are permissible in self-directed IRAs and have the potential to garner tax-sheltered income for retirement.
Both experienced and novice investors can certainly participate in forex trading. The aftermath of the Brexit vote may still provide some unique opportunities, but you can be the judge of that. If you’re new to the vast and fast-paced world of foreign currency exchange, there are few terms to know before getting involved—so, this article is just for you, geared to forex trading for beginner investors.
The rate at which one currency can be exchanged for another is aptly called the exchange rate. The British Pound, like the U.S. Dollar, has unique exchange rates with all other currencies around the world, and traders try to profit off of the daily volatility and fluctuations in these rates.
Just like the spread stock traders see, a forex spread is the difference between the buy price and the sell price of any specified currency pair. For example, USD/EUR 1.2635/1.2645.
Currencies are usually traded in what is called “lots.” A lot is equal to 100,000 units of the base currency. Margin is relied upon by many forex traders because foreign exchange trading markets tend to be less volatile than equity markets. So in order to see sizable returns on trades, position sizes must be larger. Margin is used here to borrow money from the brokerage to make the large trades. Traders that rely on margin pay interest on the borrowed money.
Please note: Forex trading for beginner investors and pros can be costly if traders do not fully understand what they are getting into. It can be a great way to make money, but even the most sophisticated investors face potential risks, as with any investment. Again, these assets are allowed in self-directed retirement plans, but if you’re unfamiliar with the process, Midland IRA highly advises you to seek counsel from a worthy source.
Contact Midland IRA to find out more about forex trading in a self-directed IRA by calling (239) 333-1032.