FX was the key word. I learned about the wonderful world of FX when I was getting my MBA in Information Systems and Finance. Which is just a fancy way of saying "Foreign Exchange." Some old people still insist on calling it money.
What I found most interesting about the foreign exchange market is that some players have to take part in it. Compare that to the stock market, where everyone wants to buy and sell. Banks are important players in the foreign exchange market because they have to clear international deals and international currency transactions.
This gives the trader a huge market full of chances. The goal is the same on any trading floor with a moderate level of sophistication: find deals that can be quickly turned into winning positions, usually within a day. This need to square off within one day is felt especially strongly because there is a high cost of carry and margins need to be marked to the market at the end of each trading day.
At this point, I have to say that there is no real "end of a trading day" in the foreign exchange market. As the earth turns, there is always a spot somewhere on the globe that is just starting to see the sun rise. Still, there are a few major markets, with London at the centre, where the most currency deals are made.
Back to talking about trading, foreign currency dealers are always looking for ways that "pigs," or people who have to trade, can help them make a profit. This wishful thinking has made many traders unhappy, but I also know dozens of very disciplined traders who have made a nice little fortune trading in Dollars, Pounds, Yens, Euros, Rupees, Cruzeros, and who knows what other currency.
And if you know the word "dollar" well, remember that there are a lot of dollars to deal with. Are we talking about the dollar from the United States? Or is it from Australia, "down under"? Or does it have a roaring lion from Singapore on it?
As you can see, it's not easy to figure out where a currency is going, mostly because it doesn't follow the common sense that people use when picking sticks. This doesn't mean that you can't predict exchange rates. I'm writing this article at the end of 2007, for example. I'm willing to bet that the Indian Rupee will continue to rise steadily against the US Dollar for at least the next three years.
So, will I be wealthy? Well, the rise is going to be so small and spread out over such a long time that I won't be able to use my prediction to make any real trades. And if you are reading this, please know that I am not giving you professional advice. I am just thinking out loud.
I hope this article gave you something to think about when it comes to forex trading.
