The Life of a Forex Trader

The life of a foreign exchange (forex) trader can be both stressful and thrilling, often at the same time. Forex trading offers opportunities and flexibility that stock markets cannot match. If you are thinking about this area as a career, you will want to gauge your own ability to handle pressure, as well as your comfort level risking capital (your own as well as someone else's). Forex trading is filled with news flashes, analytical thinking and, hopefully, timely investments.

Forex traders use computerized platforms to access currency prices. "Desk | San Francisco" is Copyrighted by Flickr user: blupics (Blue) under the Creative Commons Attribution license.

Basics
Forex traders operate by trading currency on the foreign exchange. Typically involving the U.S. dollar and its trading partners, such as the euro, the British pound, the Japanese yen and the Canadian dollar, trades are made by simultaneously buying one currency while selling another. Traders try to time small fluctuations in currencies to make money on the difference. Forex pros may work for themselves or be employed by a brokerage or firm that specializes in trading. Forex brokerages are regulated by the National Futures Association.

Geography
As a forex trader, you need to be familiar with trade platforms, or computerized programs that report quotes on currency prices as they occur. Because currency markets are global, forex operates 24 hours a day during the trading week; as the market opens in New Zealand on Monday morning, local time, it is still only early Sunday afternoon on the East Coast in the United States. Trading continues through the day as Asian, European and North American markets open successively. For this reason, forex traders can be active much more often and for longer hours than traditional stockbrokers.

Features
Forex traders learn to develop a trading style. The two major trading styles are called technical and fundamental. Technical analysis relies on the history of price changes in a given currency pairing, while fundamental examinations incorporate world events, economic news and national policies into trading strategies. Some forex traders even combine both trading styles.

In general, your trading style will ultimately depend upon your own skills and strengths. Mathematical and statistical experts tend to like a technical style, while news junkies may gravitate toward fundamental analysis. Regardless of your preference, choosing a style will help you to ground your forex trading career with empirical evidence, rather than pure emotion.

Effects
Because of the unconventional hours of forex markets, forex traders may find themselves working nontraditional hours, such as early in the morning or on weekends or even holidays. In addition, trading on behalf of a client means that you would be risking someone else's money.

Developing confidence in forex markets, and being able to convey your strategy as well as the gravity of the risk involved, is key for any trader. As a forex trader, you may become especially busy during times of a weak stock market. This is because falling equity values cause money to flow to better opportunities. The increase in forex trading during the 2000s is partially due to investor flight to profits available in currency bets, so a forex trader needs to be prepared to work harder and more often during such periods.

Warning
Forex trading moves at a particularly fast pace. Because of the use of leverage, or small betting amounts to control large trades, it is possible to make or lose large sums of money in mere minutes or even seconds. For that reason, forex traders can expect to spend long hours in analysis and in simply watching markets move, waiting for the right opportunity to invest. As a forex trader, you will want to be keenly aware (and make any potential clients aware also) of the risk of currency trading. Like stock markets, a return is not guaranteed, and you can lose your entire initial investment on a bad play. Forex traders need to be constantly aware of their appetite for risk.