Foreign Exchange, Forex, FX - Good or not?

Hi,

I have read a lot of people talking about Forex, so I thought that I'd try to figure out what the deal was. Is it like the lottery, or does it offer some promise to make money? Is it risky? Does it cost a lot?

First things first, Forex trading allow you into a leveraged position. This isn't the same sort of leveraged position as you would get with ordinary shares - margin lending. With Forex, your position is closed out by the amount of money you put in being wiped out. In other words, you can only loose what you put in, that seems to be the case anyway. The upside to that is that you can leverage the market something like 100:1, in other words if you put in $1000, you have access to $100,000. This means that the money you put in is amplified in effect, to give you a greater effect, but this works in both the positive and negative direction.

Forex works through pips, for example, if a currency is trading for 3.1456 and goes up to 3.6556, then it has gone up 200 pips. The other thing that happens is that you but one currency by selling another, and making money from then selling that.

Is Forex like the lottery? Well, in the same way that it would be if you participated in shares without using Fundamental or Technical analysis. If instead you use patterns, trends and so on to make your calls for Forex, you can potentially make a lot of money. So here is another avenue of making money that relies largely upon technical analysis, so on that basis, I will have to learn how that all works, and report back to you all.

Is Forex risky? Well, it can be. If you try to make millions, and are not sensible with protecting your principle, then you can get into risky situations, however if you correctly analyse, and are sensible with trades, it seems plausible that a Forex trader could make some good money.

Finally, does it cost a lot? As previously mentioned, you get a leveraged position, so you don't have to put up a lot of money to make a lot of money, it seems.

Having only just started to read about this area, I would love to hear some feedback from the traders out there who have real experience with how the Forex market works, so that I can talk to you, and you can perhaps write a post of two to help our readers?