Forex is an unregulated market with an average turn-over that runs into billions and thus allows many participants. The forex market always offers a piece of the action regardless of whoever you are and the location. It involves trading or speculating against other traders on the direction of currency. There are key things which a person intending to start this market needs to consider like; learning how to select a broker, setting up a trading account, dedicating funds, using a trading terminal and other few things necessary when getting started with forex trading.
Learn the basic concepts
Forex brokers: This is the person who facilitates your buy and sells orders and also helps in technical and fundamental analysis of the market to help you make more informed decisions. They can be either brokers by regulation or brokers by order execution. A regulated activity means that there are appropriate legislation and a dedicated government that licenses and regulates financial brokers. In selecting a broker, involves figuring out what model of order execution to use. If a broker is licensed by a well-known institution one feels comfortable and safe from a broker manipulating your funds or altering charts.
When choosing a forex broker:
– Choose a regulated broker.
– Choose a broker who offers a minimum deposit amount
– Check the leverage and contract size
The Account: There is a variety of trading accounts to choose from, and most retail forex brokers have several available. Accounts vary in minimum initial deposits, leverage provided, financial instruments etc. There are micro accounts that allow trading with as little as $10 deposit with a leverage of 1:1000 enabling the trader to make a considerable profit. A standard account has an initial deposit starting from $100 to $200 with a modest leverage.
There are also dedicated currency trading accounts and VIP accounts with extra features. Whichever account one comes to choose with the broker, read and understand the terms and conditions and everything the account has to offer.
Financial Leverage: This is the amount by which you request your broker to magnify or increase your trade value. It is often quoted in ratios such as 1:50 which means when trading on a 1:50 leverage, your $100 is magnified to $50000.Higher leverage can be used to trade higher volumes. Overtrading would lead to less free margin and a higher pip value. Leverage is quite important both in terms of making profits and managing risks and therefore, your trades.
Start Forex Trading: After selecting the forex broker and understanding all the terms and conditions, it is recommended to first open a demo trading account. It is a good way to get acquainted with forex markets and helps understand your trading style (Scalper) and approach technical analysis.
Forex trading is one of the most active and dynamic ways to trade the financial markets. Learning to trade in forex markets can give a good foundation to trading other markets like derivatives or equities.