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How to Start Trading Currency In Retirement – The Basics

Trading foreign currency is a great way to make money in your spare time, so it should come as no surprise that a lot of retirees are turning to the world of forex to pass the time and boost their retirement funds.

If you are interested in learning how to trade, then you should start by setting up a forex account with a reputable broker. Look for a broker that is regulated in the country or state where you live, and that has been around for a long time. Do not be wowed by high signup bonuses or other offers – focus on the reputation of the broker. You need to be confident that the money you deposit into the broker’s account will be in safe hands.

How Trading Works

Trading in the forex market works similarly to trading in the equities market – you make a purchase because you believe that the value of a particular currency will go up when compared to the value of another currency, and if you are correct, then when you sell your currency you will make a profit. FOREX BROKER LINK

A lot of brokers offer something called leverage. This allows the trader to buy and sell large amounts of currency even if they have only a small amount of capital. Leverage typically starts at 50:1 and runs up to as much as 250:1. If you use leverage at 50:1, then your $100 deposit offers you the opportunity to trade $5,000 of currency. The problem with leverage is that it amplifies both gains and losses. If you make a profit, you profit on the whole trade. If you make a loss, then the loss includes the whole trade too – so it is easy for the loss to eat up your entire bankroll. In fact, a very bad trade could leave you owing the broker even more money.

For this reason, it is important that you make smart use of stop losses when you trade, and that you use only leverage that you are able to afford.  Leverage is a very high risk form of trading.

How Brokers Make Money

If you are used to other forms of trading, you may be used to paying commission on your trades. This is not how forex brokers work. In the world of forex, brokers build in their profit into the currency spread. The difference between the buy and the sell price is the area where the broker makes its money. Different brokers charge different amounts on the spread,, and while the difference can be as little as 0.0001 (a pip) between one broker and the next, when you consider the volume of currency trades that the average person would be doing, the price difference can mount up quickly. For this reason, you should pay attention to the prices on each currency pair. Once you have some confidence and have tried a few different trading platforms you may want to settle on a broker that offers a platform you like, and has the best prices for your favorite currency pairs.