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How To Get Started In FOREX Trading
The foreign exchange market (FOREX) offers many advantages to investors. But you need to know where to begin. This short guide will give you the FOREX basics, so you can quickly start participating in this fast growing market.
In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980�s the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why FOREX trading has become so popular. With a 100:1 margin account, you can control $100,000 with a $1,000 investment.
A Learning Curve
FOREX is not simple, though, so you�ll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the FOREX, there are risks involved. Your first move as a beginner should be to find out as much as possible about the forex market before risking a dime.
Find A Forex Broker
FOREX traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Open an Account with a forex borker
Opening a FOREX account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker�s money.
Once your account has been established, you can fund it and begin trading.
Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in FOREX trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.
Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the �spread�: the difference between bid and ask prices.
Paper Trading Forex Market
Beginning traders are strongly advised get accustomed to FOREX by doing "paper trades" for a period of time. Paper trades are practice transactions that don�t involve real capital. They allow you to see how the system works while learning how to use the various software tools provided by most FOREX brokers.
Most online brokers have demo accounts that allow you to make free paper trades for up to 30 days. Every new FOREX investor should use these demo accounts at least until they are consistently showing profits.
FOREX Software
Each forex broker has its own set of software tools for making transactions, but there are a few tools that are common to all FOREX brokers. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers� web sites.
Almost every broker operates on the Internet. To access a broker�s online services you�ll need a reasonably modern computer, a fast Internet connection, and an up-to-date operating system. Once your account is set up, you can access it from any computer just by entering your account name and password. If for some reason you are unable get to a computer, most brokers will allow you to make trades over the phone.
There are lots of ways to make money. FOREX trading is just one more potential stream of income � if you are prepared to learn and practice.
From http://www.forex-articles.net
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REACTING TO NEWS
News or data are always read by the market along the prevailing market bias. Data can provide a good reading for the state of the market. If the data is bad but the price is still rising or not affected, it must be a bull market which means buy on dip strategy is a better one. Conversely, if the data is good but the price is not rising or even falling, it must be a bear market which means sell on bounce strategy is a better one. The inflexion point must be when bad news or good news. no longer affect the prices as they have done before. Medium/long-term bias changes are usually accompanied by such reactions to the news. It is not the numbers that counts but how the market reacts to the numbers that counts. That gives some comfort to those who are not privy to the numbers already
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So, the Forex broker is an advisor who advises you about the forex market and allows you to work for 24 hours a day with major currencies like EUR, JPY, GBP, CHF etc against the US dollar on the spot, i.e. according to the current prices on the forex international exchange market. But the level of profits depends only on your abilities as well as your timely decision.
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There are risks in trading foreign currencies. Like any investment, forex investing carries substantial risk. You can lose all of your money and foreign currency trading can be extremely volatile. Make sure you thoroughly research futures trading and foreign exchange trading entirely before setting off on your adventure.
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