Forex Basics: How to start Your trading

By: Yudi Hariyanto

Everybody must have known about forex (currency exchange) market and advantages that offers. To start and try, there’s some tips about basics in forex and tell what you need to join in this challenge market.

Trade forex Learning

Before 1980’s, only large players such as banks and multi national corporations were permitted in the forex market. But after that, there are revisions that allow small investors to participate using ‘margin account’. This one makes forex trading has become so popular because with margin account 100:1, with a $1000 investment you can control $100000.

However forex is not an easy thing and you need to learn to make prudent investment decisions. Learn the risks that involved in and find out as much as possible about the forex market are a good step for any beginner before start trading in Forex. Also don’t forget to set up your mentality.

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 forex 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.

To open an account in forex is very simple. You just need to fill out a form and provide the necessary ID. The form will include a margin account agreement which states that the broker can interfere with any trade it deems to be too risky. This is to protect the interests of the forex broker – most trades, after all, are done using the broker's money. Once your account has been established, you can fund it and begin trading.

Many brokers have different types of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in FOREX trading for as little as $250, while standard accounts may have a minimum deposit of $1000 to $2500 depending on the broker. The amount of leverage – using borrowed money – varies with accounts. High leverage gives you more money to trade for a given investment.

HOWEVER – beginner traders are advised to get familiar with 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 that are 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 is strongly advised to use these demo accounts at least until they are showing consistently steady profits.

Each broker has their own set of software tools to aid in making transactions, but there are a few tools that are common to all FOREX brokers. Real time quotes, news feeds, technical analysescharts, and profit and loss analyses are some of the features you should expect to see on most online brokers' web sites. and

Almost every forex broker operates on the Internet. To access their online services you should have a reasonably modern computer, a fast internet connection, and an up to date operating system such as Windows XP. Once your forex account is set up, you can access it from any computer – just enter your account name and password. If for some reason you are not able get access to a computer, most brokers will allow you to make trades over the phone.

Forex Trading are commission free, means that you can make many trades in one day without worrying about gaining high brokerage fees. Brokers make their money on the 'spread' – the difference between bids and ask prices.

Is There Any Money Left In Currency Trading?

Currency trading may be one of the most liquid forms of trading, but it is also a volatile market that requires strategy if you wish to make money. The truth is that more people make small profits in this market, while a few are highly successful. The constant change makes this form of trading exciting and with a high profit potential; however, making a fast buck in this market may not be as easy as it used to be.

What is Currency Trading?

In its basic form, currency trading, also known as "forex trading," is simply that--trading money. It involves trading one currency for another, such as U.S. dollars for the Euro. The exchange rate is known as the foreign-exchange rate, forex rate, or FX rate and is one of the largest markets in the world, trading trillions of U.S. dollars each day. Currency trading gained enormous popularity in the 1990s, and continues today. One reason this type of trading is so popular is that it can be done from a computer, twenty-four hours a day. There are fewer currencies to trade with, which makes learning the practice much easier (as opposed to learning about the many stock options available). The most commonly traded currencies are the U.S. dollar, the Japanese yen, and the British pound.

Currencies are traded in pairs. The trader buys the one that he or she believes will appreciate in value over the other. Currency fluctuates as there is demand for it. Interest rates tend to be an indication of a currency's demand. The higher a country's interest rate, the higher demand. However, countries will sometimes try to create demand for a currency by changing interest rates. The well-informed trader needs to conduct research and make educated guesses on a currency's future.

Currency Trading is Big Business

The currency trading business is big. An estimated two trillion in U.S. dollars is exchanged each day. The forex market is the largest in the world. Because it can be done from home, many people are interested in getting involved, and the payoff can be big. It is also possible to get involved with little investment. Traders simply determine how much they are able and willing to risk, and they can enter the market.

As with other forms of trading, watching the market and making calculated decisions is more likely to result in a profit than making decisions based on emotions, hunches, or preferences. Many courses are available on currency trading. Learning more about the process can help traders make better choices. Choosing a quality course is also a matter that requires a bit of research. However, currency markets fluctuate on both short and long-term timelines, and learning how to best track these changes and the events that affect the markets can help traders, especially those new to the process. The allure of making quick cash is still out there, however, as it is possible to close a contract after a few minutes, hours, days, or weeks.

Is it nearing its Peak?

The currency trading frenzy, which expanded rapidly during the 1990s, may be reaching a peak. Why? While in some ways currency trading is easy, many people who enter the market do not make money. The idea that you can make quick cash is not as easy as it sounds. Additionally, while traditional stocks are based on a company's physical assets and product, currency trading is not absolute. Further, governments control, or attempt to control currencies to reach political objectives. Unforeseen events, such as natural disasters, can also alter a currency's value, making it more difficult to make an educated guess on a currency's future. Finally, the global marketplace is changing currencies around the world (the Euro is one such example).

This does not mean that a person cannot make money in the currency market. However, as the global marketplace continues to expand and global politics affect currencies, it is much more difficult to determine a currency's value. Making money in the Foreign Exchange market is possible, but it is not easy. Even economists have a difficult time estimating the future of currencies and purchasing power, so a trader must conduct thorough research, determine trends, and try to make the best guess possible.

Forex Trading – An overview

If domestic stock market fails to interest you any more, consider trying your trading skills in Forex. The forex or Foreign exchange is the ideal place for those traders who look for a little more adventure in their moneymaking games. The Forex trading involves the trading in all sorts of world’s leading currencies. The Forex trading refers to a simultaneous buying and selling of different currencies. The forex trading always involves the combination of two or more currency; that is you have to trade one currency in comparison to the other. The currency combination used in this international currency trade is known by the term, ‘cross’. As for example, the Euro/US Dollar, or the GB Pound/Japanese Yen and you can deal in literally limitless combinations. However, the most commonly traded currencies belong to the group of “majors” like EURUSD, USDJPY, USDCHF and GBPUSD.

Global Forex trading provides the investors and financial institutions a new financial playground in the backdrop of a volatile currency environment in this age of globalization and free market. With the base camps in the topnotch cities like New York, Sydney, Tokyo, London, and Frankfurt, the Forex market is a kind of OTC or over the counter market where trading takes place directly between the two counterparts. Unlike the national stock markets, Forex is not under the regulation of a central exchange; it is operated on the “interbank” market. You can trade in this 24-hour market over telephone, or over the global electronic networks. These are some of the reasons behind this enormous growth.

At the core level, online foreign exchange trading can be defined as the exchanging of one currency for another. It is a kind of 'spread ' trade where buying of one currency must be followed by the sale of the other. You have to buy one currency and sell another simultaneously. Online Forex trading system is described as an ergonomic process. A seasoned trader has great intuitive abilities. You can perform all the online trading functions from a single screen including placing a trade, leaving an order, position and order management, and margin analysis. The foreign exchange market traditionally belonged to such big shots as banks, brokers and big export Houses. But picture has drastically changed with the invasion of the market by the internet. Nowadays, more and more common people are participating in the trading in Forex market. Are you confident about your trading skills? Then you can also join the bandwagon of the big international investors. You will get all the necessary resources and information right in the Internet. Being informed is important as side by side of great money making potentials, the functioning of foreign exchange market is characterized by volatility, unpredictability and risk factors.

Trading in the foreign currency proves to be exciting and in most of the cases profitable. Those who become enormously successful in this field have the unique ability of locating the risk factors. With the all-invasive growth of Internet the monopoly of big investors in the forex market has ended. But before stepping in this volatile world of foreign currency trading a small time investor should always keep in mind the implications and pitfalls that this market is entailed with.

***You may use this article on your website as long as the two URLs are hyperlinked. Tania Penwell provides information on forex trading and other financial topics for Money Savvy - your guide to retirement savings, trading, taxes, and more. Article Source: http://EzineArticles.com/?expert=Tania_Penwell