basic forex 2

Brokerage

There are many FOREX brokers to choose from. Here are some things to look for:

Lower spreads save you money. The spread, calculated in "pips", is the difference between the price at which a currency can be purchased and the price at which it can be sold at any given point in time. FOREX brokers don't charge a commission, so this difference is how they make money. In comparing brokers, you will find that the difference in spreads in FOREX is as great as the difference in commissions in the stock arena.

Make sure your broker is backed by a reliable institution. Unlike stock market brokers, FOREX brokers are usually tied to large banks or lending institutions because of the large amounts of capital required (leverage they need to provide). Also, FOREX brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). You can find this and other financial information and statistics about a FOREX brokerage on its website.

Find a broker who will give you what you need. Forex brokers offer many different trading platforms for their clients - just like brokers in other markets. These trading platforms often feature real-time charts, technical analysis tools, real-time news and data, and even support for trading systems. Before committing to any broker, be sure to request free trials to test different trading platforms. Brokers usually also provide technical and fundamental commentaries, economic calendars and other research.

Choose the appropriate account type. Many brokers offer two or more types of accounts. The smallest account is known as a mini account and requires you to trade with a minimum of $250, offering a high amount of leverage, which you need in order to make money with so little initial capital. The standard account lets you trade at a variety of different leverages, but it requires a minimum initial capital of $2,000. Finally, premium accounts, which often require significant amounts of capital, let you use different amounts of leverage and often offer additional tools and services.

Software

FOREX software is designed for dealing in the trade of foreign currencies. Most FOREX trading software comes with built in signaling capabilities, so you know when it's the right time to buy or sell. Some trading platforms enable traders to execute automatically 24 hours a day.

If you decide to use FOREX trading software, there is no doubt that it will guarantee profits or not result in losses from trading. Trading currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. When it comes to trading, there is so substitute for accurate and instantaneous information.

Software finds price patterns that fulfill user-defined performance statistics and risk/reward parameters by searching historical data in a fully automated way. It is equipped with an intuitive interface where its user can specify data files and the performance criteria the price patterns must fulfill. User is not required to write any code.

There are many companies that create FOREX trading software. This a useful resource to read various FOREX software reviews - http://www.eforexsoftware.org/

FOREX Rules

Here are some simple rules for beginners in FOREX trading.

FOREX traders should use the free demo account to study FOREX trading

Beginners must patiently study. Beginner FOREX traders may first test the demo account where they can study process, develop individual FOREX trading strategy. If their capability of making profit enhances day by day, this indicate that a beginner FOREX trader might draw up the real FOREX trading account.

Use stop loss to reduce risk

FOREX trader must be able to afford taking loss. Using the stop loss will prevent any further loss, the affordable loss depends on the account available margin situation. If there is a stop loss, FOREX traders should not feel upset because he or she has prevented the loss from getting worse.

The account margin must be sufficient

The lesser the trading margin, the bigger the risk, therefore beginners must avoid letting the account margin be too little. Such account amount does not allow any mistake to happen. Even a well-experienced FOREX trader can make mistakes.

Record the trading details

The beginner should record all the trading details, whether there is certain news or other reasons that influence profit and loss. FOREX traders can not remember the history of every trade, therefore recording is helpful in enhancing FOREX trading skills.

Do not enter the FOREX market after making loss

Do not eagerly open a new reverse market position in order to recoup from loss. This will only make the situation worse. Do not play with the FOREX market by guessing.

What is Leverage?

The FOREX deals are accomplished in lots and each lot consists of 100,000 units of any particular foreign currency. To purchase one single lot of foreign exchange is required and that may run into hundreds of thousands of dollars which means the small investors are left out of the fray. For this very purpose the concept of leverage was introduced in the FOREX trade.

Leverage backed with credit, such as a margin account, is very common. Usually the leverage in the margined account is collateralized by the initial deposit made by you in that account. If the value of the trade goes down significantly, the broker may ask you to either deposit more cash, or sell a portion of your holding. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. For example, a ratio of 100:1 means your broker would lend you $100 for every $1 of actual capital. Many brokerages offer as much as 250:1.

Margin requirements and interest vary among broker/dealers. The amount of leverage you use will depend on your broker and what you feel comfortable with. You can get leverage from a high as 1% with some brokers. This means you can control $100,000 with the investment of only $1,000. The broker sets a minimum account size also known as account margin or initial investment. Once you have deposited the required sum you will be able to trade in the FOREX market.

The online FOREX market has further reduced the requirement of the margin amount to a great extent and it is now reduced to couple of hundred dollars from the initial hundreds of thousands dollars. The small investor in a FOREX market can earn due to the presence of the leverage accounts in the online FOREX market. The effect of the leverage accounts actually enables the small investor to earn huge returns like if he invests $300 on 1% leverage he gets to operate the FOREX of $30,000. The leverage is the key to make this FOREX trade profitable for the investors in true sense and till it is there it will continue to attract thousands and thousands of people.