The forex market gives many advantages to investors. But we need to know where and how to start.
In the past, forex trading was extremely limited to few but large players such as the central banks, mega companies. In 1980’s the rule had changed, by allowing smaller investors to participate the foreign exchange using margin accounts. These accounts are the reasons why forex trading has become so popular. Using a 100:1 margin account, you can control $100,000 with a $1000 cash.
The Learning Curve
Learning Forex is not easy. Although it is easy to start trading, but to trade profitable, is another issue. Having some knowledge reduce the risk you involved. In this way, your trading decisions will become wise.
So as a beginner, we should learn and find out as much as we can about the market before we invest any amount.
Getting a Broker
Forex traders need a broker to handle their transactions. Most of the brokers are reputable and associated with banks or other large financial institutions. A forex broker will have to registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC). This serve as a protection against scams, fraud and other abusive trading practices.
Open an Account
Just fill up the form and give the necessary identification. The form includes a margin agreement which states that the forex broker may intervene with any trade that seems to be too risky. This is meant to protect the interests of the broker as most of the trades are carry out using the forex broker’s money.
Once your account has been created, you can start putting in money and trade.
Many brokers give different kinds of accounts to suit the needs of individual investors. Accounts like mini accounts allow you to trade forex for as little as $300. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage also varies with the account type. Investors use leverage to profit from the fluctuations in exchange rates between two different countries’ currencies. The higher the leverage accounts are, the more money you will earn when you trade for a given investment. However likewise, these accounts can wipe your capital easily and fast if you do not trade properly.
All your trades are commission-free. There is no high brokerage fees you have to worry about when you make many trades. Brokers make their money on the pip spread, which is the difference between the bid and the ask prices.
Demo Trading
Everyone will advise to you that to get use to forex, you have to do a long period of time of demo trading. Brokers allow you to trade without any capital and practice your forex strategies through their demo accounts.
Beginners should use this chance to get used to their trading platform. Know how to use their software tools and navigate as much as possible. Every new forex traders should use these demo accounts until they are consistently making profits and go to an live account.
Read up
News, blogs, forums, books and many many more. Learn as much as you can from these free resources. Some brokers offer real-time quotes, news feeds, technical analyzes and tips to do well in your forex trading. Learning is one of the most important factor in forex trading. So never give up learning even though you are constantly making profits.
There are many different ways to make money. Forex trading is simply one of the best way to make good income. Just as long as you are prepare to learn, practice and never give up.
About the Author
Article courtesy of whizforex.com.
