Getting Started In The Currency Exchange Market Or Forex Trading
The most liquid trade is the foreign currency exchange market. Banks begin trading at 8:00 am, Monday morning in Sydney, and they don't close until 5:00 pm, Friday evening in New York. Brokers remain open around the clock 24-hours a day throughout the week.
Traders buy currencies in pairs represented by three-letter symbols. EUR/JPY indicates the euro paired with the Japanese yen. If a speculator is using the US dollar (USD) to fund the trade the Euro is fist bought with the dollar, then exchanged for the yen. If the buyer "sells short" the yen is expected to drop in value. If the purchase is "long" the yen is expected to rise in value. If the trade moves the right direction profits can be considerable.
The actual monetary value moves in tiny increments called pips. A pip is usually the 1000th digit placement after the decimal point in most currencies. Leverage is borrowed money from the broker to trade in lots.
The size of lots available depend upon what sort of accounts and options individual brokers offer. Usually the lot sizes are 1,000 (micro), 10,000 (mini), or 100,000 (standard), but some brokers offer unusual lot sizes.
Leveraging a trade with 100:1 is to buy or sell a "lot" with 100 units of the brokers funds while the trader only puts up 1 unit.Leverage can range anywhere from 1:10 to 1:500. American traders have to abide by CFTC regulations which cap leverage at 1:50. It is important to remember that risking too much leverage can be dangerous because lost funds must be repaid. Prior to trading, a beginner must become knowledgeable about risk management techniques.
90% of beginning traders fail, but the currency exchange market is an exciting and profitable industry for educated traders. With books and internet resources readily available a good Forex education can be easy to acquire. Forex forums are full of experienced traders offering good advice to beginners. Learning about Forex strategies and trends before placing the first trade will help keep the trader in the 10%.
Article Source: FxTradingStock.com
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Quit wasting your time with forex if you aren't making profits at all. The business of currency trading is a game played only by those willing to learn.
by: Veidi Yee
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Date: Mon, 9 May 2011
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