Basics of Forex Trading

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What is Forex trading all about?

Forex or FX is short for foreign exchange and is a system of betting on the direction of currency pairs. Forex trading can be done through a broker or through a financial institution such as a bank.

Forex trading is all about making big money and some successful investors have been able to make large profits by trading on Forex markets. Forex is the largest financial market in the world with over $3 trillion traded on a daily basis. The Forex markets are open 24 hours a day, 5 days a week so traders can place trades at any time day or night. Currency pairs are posted in three letters such as USD or EUR and a pair is listed as EUR/USD, or JPY/GBP. There are 8 main currency pairs and a group of more exotic pairs.

Since Forex trading involves foreign currencies, it is highly influenced by the social and political events taking place in the countries whose currencies are involved and so it is important for a Forex trader to stay on top of the news especially the financial news.

Forex Accounts

Forex trading is conducted mostly through Forex brokers such as AvaFx. These brokers provide account management and other services a trader may need. But not all Forex brokers are the same and it is important for new traders to choose their broker carefully. Through proper research and referencing, a trader can find the Forex broker that offers the features that are important to him/her. See more on Forex brokers review. For example, a novice trader should look for a broker who offers a free demo account for use over several months. This demo account allows him to place trades using virtual money and provides him with enough experience to move on to a real trading account.

It is also advisable to choose a broker with a track record. The longer a broker has been operating, the more secure it will be. In addition, a trustworthy broker must be governed under a proper regulatory agency. Without this regulation and supervision, a broker is on his own to do whatever he wants with a trader’s money.

To start trading Forex, a beginner should fund his account with the minimum required by the brokerage. By starting small, he/she cannot lose more than he can afford. The minimum can be as low as $50 but can go as high as $10,000. Beware using leverage at first. Brokers are eager to offer the opportunity to trade on margin but this can lead to substantial losses as a trader can lose more than he started out with and then try to make it back by placing bad trades.

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This entry was posted onOctober 21st, 2013 at 4:20 pm. You can follow any responses to this entry through the RSS 2.0. Responses are currently closed, but you can Trackback..