One of the most often seen questions in forex chat is, what is forex trading? This is due to the number of new people who are attracted to forex trading by advertisements and word of mouth, because they have heard there is a lot of money to be made here.

Forex is short for foreign exchange and it involves the exchange of one foreign currency for another. Therefore, forex trading can also be called currency trading.

The different currencies of the world are constantly fluctuating in value. Currency values are relative: you have to sell one currency to buy another, so if you take a pair of currencies such as the US dollar and the British pound, if one of them falls then the other will rise. If you can predict which one will rise, you can invest in that currency, wait for the rise and then change your money back. This is how a basic forex trade works.

To get involved in forex trading, you need a computer with a high speed internet connection, and then you need to find a broker and open an account. Brokers these days all operate on the internet so you can manage your own account and place your trades live from home, or wherever you and your computer are right now. You just log into your broker account and make the trade.

Sounds simple, right? However, there are risks. In fact, there are considerable risks. Forex trading uses high leverage, which means that you can control a lot of money with just a small balance. You might put up 1% of your trade or even less.

This is possible because currencies do not generally crash in a very short time. Even if one currency suffers a considerable fall, it will retain the majority of its value, provided of course that you are dealing in one of the major world currencies. However, this high leverage does mean a high risk for your small balance. Of course if you are successful, it also means a high return on your investment. This is what draws so many people to forex trading.

In order to control the risk, you can place a stop loss so that your trade is closed automatically if the price goes against you. All trades should have a stop loss in place so that you do not risk all of your funds on a trade.

These days it is even possible to buy a forex robot to trade for you. This is automated forex trading software that interfaces with your broker account to open and close your trades automatically. Forex robots or expert advisors are easy to find but they are not all equally successful. It is important to find a good one and then set it up correctly.

Even with a forex robot controlling your account, it is still possible to lose money. The forex market is not so predictable that any system can be 100% accurate. Therefore, nobody should be trading with the rent or food money. Even assuming that you are successful, you will want to leave the money there so that it can grow to support larger trades and higher profits in the future.

So even though forex trading can be very profitable, it is something that will be a part time hobby for most new traders at first. If you want to make enough money to live on, you need a large investment fund, and these take time to build. This is a point that is often overlooked in forex chat.