Foreign exchange basics are important for beginners wanting to make money trading. Forex isn’t something you jump right into and make lots of money. Like all lucrative speculation, forex trading is risky! Anybody who is thinking of getting into forex trading should be aware of the risk involved….
There are a few things that you need to know if you’re new to FOREX trading…
* Foreign exchange,FX, currency trading or Forex all mean the same thing. FX is a speculative form of investment so it has the potential to make a lot of money fast because of the use of leverage: a small account balance controls a lot of money in the market. Forex brokers offer up to 200 times leverage which means you can control sums that are 200 times the amount that you have put at risk. Yes, at the same time it means that you can lose fast, which is why you have to make sure you set stops to minimize losses.
* Fortunately, Forex can be risk free in the beginning. Most brokers offer demo accounts so that you can try out their systems and tools without risking any real money, you trade in the real money but using virtual money. You will need a broker, they give you your trading account where you’ll be placing your trades using the platform or trading software that comes with your account. Many brokers will also provide real time price charts so that you can track prices and trends and analyze the market, this means that you can learn to trade in demo mode, and not go live until you are sure you can be profitable.
* Unlike the stock market, the FX forex market is open 24 hours a day during the business week. This is because forex trading is not limited to your own country. It involves all of the world’s currencies. It’ll always be FX business hours from Monday morning to Friday night somewhere in the world! If you have a day job, you can still trade in evening or in the morning before you start work…
* You can get started in Forex with a very low initial investment. In the past, forex trading was only for the big financial institutions and the rich, but the internet opened up the market to everybody and brokers are letting you open an account with a few hundred dollars or even less. Forex trading has opened up for the small investor that wants to take part in trading from home…a computer with internet connection, a few hundred dollars to open an account and you’re on trading in demo mode!
* Forex trading is not like having a regular job with a salary. There is no security and plenty of risk. In a sense it’s like starting your own business…Remember always to keep your risk per trade very low. Between 1% and 5% of your funds is what’s recommended by most successful traders.
Keeping your risk low enables you to survive difficult periods, keep protecting your funds so you can keep trading and making money Risk management is very important in Forex, keep this point in mind as you go from learning the basics to trading in demo mode and then to the real money Forex world!