Getting Started With FOREX Trading
Foreign Exchange market trading in a very fast growing field that offers some significant advantages over other investment methods. However many people are reluctant to become involved simply because they lack the necessary knowledge. This guide will help explain the basics of FOREX trading so that you can participate in this market trend. At one time the Foreign Exchange market was restricted to very large players such as national banks and corporations. In the 1980's though the rules controlling the market were changed to allow smaller investors the chance to participate using margin accounts. Margin accounts are the primary reason that FOREX trading has become so popular, with margins of 1:100 you can control $100,000 with only a $1000 investment. There are risks involved with FOREX trading, and even though getting started trading is not difficult FOREX trading is not simple. It is very important for someone interested in trading on the foreign exchange to learn as much as possible about the market before they start trading. You will need to go through a broker to actually make trades on the exchange. You should be sure to find a reputable broker that is associated with an established financial institution such as a bank. To help protect yourself from fraud be sure that the broker you select it registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM). Opening a FOREX account will involve filling out paperwork and providing an acceptable form of ID. You will need to sign a Margin Agreement, this form will state that the broker can interfere with any trade, if the broker feels it is too risky. This form is to protect the broker since most of the trades will actually be done with the brokers money, in a margin account. Then you will need to fund your account so you can start trading. You can fund the account several different ways such as wire transfer or even credit card depending on the broker. Most brokers will provide several different account types. Usually there will be a mini account that you can open with as little as $250. The standard accounts will usually take an investment of $1000 or more. The actual margin rate will also vary by account, this is the amount of money you can control per each dollar of your money. Higher level accounts will provide you with greater leverage and allow you to control more money. It is highly recommended that you perform paper trades for at least a month before you attempt any real trades. Paper trades are where you record the trade you want to do with out actually investing any money and then see how much money you would have made or loss accordingly. This allows you to learn how the system works without losing money to do so. I would recommend that you continue to paper trade until you can consistently show a profit doing it. Most brokers will have demo system that you can use for free for at least 30 days. This allows you to practice your paper trades online just like a real trade except there will be no money gained or lost. This
not only teaches you about the market but also allows you to learn the software system used for trading. Each broker will have their own system for making trades and gathering information. Most brokers though will provide the following tools: real time quotes, news feed, technical analyses and charts and profit and loss analyses. Almost all brokers have an online system that will you to make your trades online. You will need a pc with internet access to take advantage of this. You can also make trades over the phone with most brokers. There are no commission charges on the trades, the brokers make their money on the spread between the bid and ask price.
How To Improve Your Knowledge Of Forex
You have determined that it is in your best interest to learn Forex trading. Understanding the intricacies of how the world currency market works is an excellent way to protect your assets. If you are not sure how to go about getting into the swing of understanding and monitoring the currency exchange, here are some suggestions of how you can gain the expertise that you are looking for. First, sit down with your banker. Every bank in the world is plugged into the process in some form or another. Chances are your banker can help you grasp the basics of how foreign exchange rates are calculated, what types of situations can impact the rates, and what happens when there are fluctuations in the rate of exchange between two countries. Your bank may even have someone whose main role is to help bank customers understand finance principles in more detail. It is not unusual for banks to offer short courses to their clientele on subjects of this nature. If you have an investment broker, he or she most likely has a well-rounded understanding of the concepts of currency exchange. Schedule some time to sit down with your broker and learn some of the basics. You may find that your broker has resources available to clients that will help you research the subject of currency and exchanges in more detail, as well has help keep you up to date on what the current rate of exchange happens to be for various countries compared to your own. If you are really serious about getting into the meat of currency trading, you may want to look at classes offered at your local college.
There are quite a number of electives that will help you build the background to truly relate to the way the currency exchange market is set up. How to spot trends, and get a better handle on how varying factors can impact the fluctuation in the rate of exchange in both the short term and the long term picture. In many cases, you may be allowed to audit these classes if you do not want to go through the process of enrolling as a student. Check with the registrar at your local college or university for more details. Of course, the Internet is also a source of both great and accurate information as well as a lot of junk, when it comes to the matter of currency trading. While you can learn a great deal from Internet sources about currency exchange, exchange rates, and what is causing a change in the rates, you need to make sure you are looking at information that is from a reliable source. You should stick to well known sites, that have a reputation for dispensing accurate information, and you will be able to learn Forex trading properly and completely form the comfort of your own home. Search for Forex forums on search engines, and join some of them. There is a wealth of information available on them that you can benefit from. It should be noted Forex trading involves substantial risk of loss and is not suitable for all investors.
Forex: No psychological limitations
Back when I first started learning about investing, I decided to start from the beginning and read basic books on personal finance as well as “guides” for understanding all of the investment world in a nut shell. Most of these authors were very knowledgeable and informative, but their investment advice was far too conservative for my taste. They would literally write chapter after chapter talking about the differences between conservative investing, which according to them generally yields somewhere around 5% PA, as opposed to “risky” investing which usually meant a diversified stock/mutual fund portfolio yielding (in my mind) only slightly higher averages. What kind of returns can you expect in the stock market? Well they say the market has gone up an average of 10% a year since Adam and Eve. Popular indexes like the DOW and the now more popular S&P500 have always, like real estate, “gone up over time.” Now, these market averages are almost worshiped like golden calves. Repeatedly drilled into my brain was the concept that there were hundreds (if not thousands) of fund managers and other “professionals” out there with Harvard degrees, decades of experience, millions of dollars under management, and they were all spending 15 hours a day consuming every single bit of market information in the hopes of beating these golden calves by a few points. What chance did I have? If Dr. Fund Guru Jr. who eats, sleeps, breathes the markets and has more credentials than I have individual hairs on my body can’t consistently make 20% a year...well...forget it
kid...your chances are slim to none. I guess I’ll buy some shares of XYZ fund and accept the scraps off the table from the stock gurus. NOT! The foreign exchange market offers many benefits that the stock market does not have. Most of these have been beaten to death on various forums, blogs, articles, e-books, etc. However, it’s always good to reiterate the positive (my own personal reason is last): - Forex offers unprecedented liquidity. With over two trillion dollars transacted per day on the market, it makes filling any buy/sell order virtually instant. That equates to less slippage and more profitability. “Paper trading” stocks vs actually trading stocks is very different, because orders may not be filled in a timely manner. The difference between trading a forex demo accout and an actual account is virtually nill. - Forex is available 24 hours a day 5.5 days a week, as opposed to the daylight trading hours of the stock exchanges. - Forex is uncontrollable by large entities. Large net worth individuals, banks and fund managers who throw their weight around in the stock market can often have huge effects on price action. Because of the immense volume of foreign currency traded per day, the market is unmoved by “heavy hitters.” Not even central banks can control the Forex market. - Forex offers up to 200:1 leverage as opposed to 2:1 stock leverage. - Forex has no restrictions for selling short, as opposed to the stock market’s “uptick” rule - Forex can actually be traded INSIDE of an IRA or Roth IRA account. - Forex gains are taxed at the preferred 60/40 rate, no matter what trading style you use (intra-day, swing, position) as opposed to the tax penalties for holding stocks for short periods of time. Profit From The Forex On Automation By Clicking Here – Only If You’re Serious!