What Is A Currency Trader?

What Is A Currency Trader? Learn with LucrorFX.Unbeknownst to many of us, thousands of professionals trade currency in foreign exchange markets every day. These professionals are known as foreign exchange traders, and they seek to make money by anticipating changes in the value of currencies. Traders use two types of analysis to try to work out which way a currency might move: fundamental analysis and technical analysis.

“Fundamental” analysis has to do with the economic outlook of the country issuing the currency. For example, today many currency traders expect the Chinese currency, the Yuan, to rise, because the Chinese economy is strong. On the other hand, the US economy has been weakened by the financial crisis, and many traders expect the US dollar to fall.

Profiting from fundamental changes often requires holding a currency for months or years. Needless to say, although long-term holdings may be handsomely profitable, it can be challenging to make a living on such positions, since they pay off rarely.

“Technical” analysis uses a different approach. The volume of the currency being traded – how many dollars or yen or euros that are changing hands – is the basis of many technical metrics. Many traders rely on moving averages, which give the average value of a currency over some specified time period. That time period can be anything from seconds to weeks. Traders often combine a longer and shorter moving average to detect the direction that the value of a currency is moving. When the short term moving average crosses above the long term moving average, traders expect the currency to rise, and they buy the currency. When the opposite happens, they sell it.

Still, trading currencies may not seem to offer much opportunity to make money. After all, the dollar rarely changes by more than a penny in a single day’s trading. At that rate, traders would need to trade millions every day to make enough money for soup!

Currency traders beat the game by using the magic of leverage. Leverage allows traders to borrow money to make trades. It sounds dangerous and, indeed, it can be, but it can also be handsomely profitable. Forex traders typically operate with about 100 times more money than they actually own. Thus, a trader with $1000 in a trading account can effectively trade $100,000 in currency! With only $1000 in an account, a trader can earn $1000 on a trade if the currency changes by $0.01 – a penny! Of course, a penny is a large fluctuation in a currency, and not common, but smaller fluctuations can still pay well.

Currency trading online has become a popular way for non-professionals to earn money. It is a great way to earn money but there is a risk of loss. Potential traders need to make sure to build successful trading skills before using actual money. There are many online brokerage firms that allow traders to start an account with modest sums, and many firms offer “practice” accounts to help traders build skills before they use real money. Lucror FX is a popular foreign exchange brokerage with excellent online service. To learn more about currency trading, contact LucrorFX today.

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