Getting Started with Forex Trading

An introduction to Forex trading requires understanding the complexity of the various factors that make the market work on a daily basis. The system of swapping currencies, one for another, for the sole purpose of raising our worth value has revolutionized the form we do our trading and our investing nowadays. In today’s market, technology has enabled us to make daily transactions automatically, without being delayed by any reason. In Forex, over the counter trading, is only a downloadable computer platform and an internet connection away that enables us to make transactions and investments. Having the right Forex broker is a very important part of your trading.

Choosing a Forex broker:

In order to proceed with online currency trading, setting up an account is a fairly simple process. Picking the correct broker, completing a brief registration form, and transferring funds to a broker are the basic steps. However, there are a few things that should be reviewed, in order to understand more about trading Forex.

Regulations:

Like any other form of trading, make sure these financial organizations “brokers” are registered by the appropriate regulatory agencies. In U.S. make sure to check the CFTC and NFA, U.S. Commodity Futures Trade Commission and National Futures Association for more info. Please be certain your broker is well capitalized, click here to view a complete list of U.S. regulated brokers and their financial statements. * Brokers outside of the U.S.; make sure they are completely regulated by the corresponding local authorities.

Compare the Spreads:

Compare the amount charged in the spreads between various Forex brokers. The spread is the difference between the price you can buy or sell the currency pair and where the broker makes its commission. When comparing brokers, you will see the difference between spreads; there is no need to pay for higher spreads.

Leverage ratios:

Understand the leverage ratios offered by your broker. Determine your risk level in your risk management plan and agree to one with your brokerage. 100:1 leverage is the most common between brokers and the most recommended to lower risk.

Margin requirements:

Because you are dealing with borrowed money from your broker, understanding the margin requirements is very important. Brokers vary the minimum amount required to deposit to open in a Forex account and they also have restrictions on your margin balance. Make sure you check your margin requirements as brokers can liquidate your order even if you have more funds to sustain the position. *Since you are borrowing money from a broker, a margin agreement is required in signing, when registering a new account.

Forms of Account:

Standard Accounts: A standard account is known for its regular lot size and uses standard trading lots of $100,000 per trade. With a leverage of 100/1, $1,000 of your risk capital should be available in your margin account in order to trade single lots. A $10 per pip is the most common form of valuing the basis points in a trade using a standard account. The advantage of trading big size of lots, is the potential for higher gains. Mini Account:A mini account is a type of account that allows traders to take smaller positions using the same type of leverage as a standard account; nonetheless working with a mini account, traders are allowed to enter the markets using only a fraction of lot size used in standard accounts. Normally positions are taken using $1 per pip, reducing your trading size to $10,000 per every $100 at risk. Institutional Accounts:An institutional account trades similar to standard accounts with the only difference being tighter spreads. The broker’s commission is usually payed separately as the spreads are set by the real interbank market.

Forex Support:

We recommend traders to work with brokers who are available 24 hours a day for full client support. Before choosing a broker, compare the reliability these brokers offer and see which ones are the most available to your needs. Being a 24 hour market, having full client support and trade desk is very beneficial. Many unfortunate things can happen, (Computer freezes, internet down, etc..); if you have an open position and need to close it, choosing a broker with a 24 hour trade desk will be correct way for you to begin.

Currencies Available:

Brokers offer a wide variety of currencies available to trade. Search for a broker that specifies in the currencies you are most interested in trading. Most brokers offer a standard list of the most common currencies seen in the market, other specialized brokers display up to 100 or more pairs for you to trade.

Trading platform:

The trading platform is the essential tool that you would need in order to start trading. This piece of software is a downloadable application offered by most brokers and it channels information back and forth between your broker and your computer. This trading tool enables you to see information like quotes, charts, and accounts summaries in real time. Brokers also offer web based software allowing you to place trades from any computer with internet access. It is important for traders to familiarize themselves with online brokerages and understand the form of relationship they are about to establish with a broker. It is easy to comprehend the material by reading all the forms and documents given. Please read all the fine print given by the brokers, it is essential for you to understand these basic rules in order for you to succeed in this type of market.

*Avoid questionable or shady acts by some brokers; honesty plays an important role from brokers to traders, don’t let them perform any form of doubtful activity in your account.