There has been a lot of news in recent times concerning FOREX, the Foreign Market Exchange. People are learning that there are many advantages that FOREX trading offers that other types of investments don’t offer. But, how does one get started with FOREX trading? It’s a lot easier than you might imagine
FOREX Trading for Beginners
Trading FOREX was once limited to national banks and large corporations. But that changed in the 1980’s. Now, smaller investors can also participate, and use margin accounts to do so. With a margin account, you can invest $1,000, and be in control of $100,000.
FOREX, however, can be complicated. Before you jump in with both feet, you really need to educate yourself about this unique market, or, as with any other type of investment, you will most likely lose your money. You need to know that there are risks involved, and find out what those risks are before you take them.
You will need a broker – but not a stock broker. You need a FOREX broker who is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission. This protects you against fraud. Obviously, you would want to do some research on your chosen broker, and ensure that they not only have a good reputation, but that they are also associated with various large financial institutions, which is how the money for margins is attained.
To open a FOREX account, you can find a broker online, fill out a form, fax or mail any copies of identification that they require, and fund your account electronically, in most cases. Note that when you start trading, you will be using your own money, as well as the broker’s money. Therefore, the broker has the right to stop any trade that he or she feels is too risky.
Look at the various account types that your broker offers. You may want to start with a Mini Account, for as little as $250. Larger accounts, such as Standard accounts, usually have minimum opening balances of $1000 or more. Of course, the leverage that you have when it comes to borrowing for margins is greatly influenced by the type of account that you have.
You do, however, need to understand the FOREX market before you begin. Don’t expect your broker to instruct you. Find a practice account (there are many online), and practice before you start spending real money. Many brokers will give you a demo account just so that you can become familiar with how it all works before you invest. Continue to practice until you are showing steady gains!
Look to see what your broker provides, but then consider other software tools that you may need, such as real time quotes, news feeds, charts and analysis, profit and loss analysis, and other tools that you may need to chart how you are doing, and that will help you determine what you need to do in terms of buying and selling on the FOREX market.
If you don’t have immediate and constant access to a good computer, FOREX may need to wait! The market changes daily, and to be successful, you really need a computer with a fast connection, and an up-to-date operating system. You can also make trades over the phone, but with the computer, you will be more up-to-date with what is happening in the market.
You will not incur high brokerage fees. There are fees, but those fees are calculated by a spread, which is the difference between the ask price and the buy price for each trade.