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Getting Started with Forex Trading

May 3, 2017 / 303 / Category : Forex

When it comes to getting started in forex trading, there are quite a few thingsthat you have to consider first. The first thing that you need to do is to find andchoose the right broker to help you in making your trades.When you are choosing a Broker you need to know that there are many FOREX brokersto choose from, just as in any other market. Here are some things that you need tolook for in making your choice:

Low Spreads

The spread, which is calculated in pips, is the difference between the price at whicha currency can be bought and the price at which it can be sold at any specific point intime. FOREX brokers don't charge a commission, so this difference is how they aregoing to make money.When you are comparing brokers, you will find that the difference in spreads in FOREXis as large as the difference in commissions in the stock arena. What this means isthat lower spreads will save you money and therefore, look for a broker that offerslow spreads.

Quality of the Institution

Unlike equity brokers, FOREX brokers are usually attached to large banks or lendinginstitutions because of the large amounts of capital that is required. Also, FOREXbrokers should be registered with the Futures Commission Merchant (FCM) as well asregulated by the Commodity Futures Trading Commission (CFTC).You can find this and other financial information and statistics about a FOREXbrokerage on the companys website or the website of its parent company. You willwant to make sure that your broker is backed by a reliable institution.

Extensive Tools and Research

FOREX brokers offer many different trading platforms for their clients just likebrokers in other markets do. These different trading platforms often show real-timecharts, technical analysis tools, real-time news and data, and even support for thevarious trading systems.Before you commit to any one broker in specific, you will need to be sure to requestfree trials so that you can test their different trading platforms. Brokers usuallyprovide technical as well as fundamental commentaries, economic calendars, andother research as a means of assisting you. Basically, you will want to find a brokerwho will give you everything that you need to succeed.

A Variety of Leverage Options

Leverage is a key necessity in FOREX trading because the price deviations (the sourcesof profit) are just set at mere fractions of a cent. Leverage, which is expressed as aratio between total capitals that is available to actual capital, which is the amount ofmoney a broker will lend you for trading.For example, when you have a ratio of 100:1, this means that your broker wouldlend you $100 for every $1 of actual capital. Many brokerage firms will offer you asmuch as 250:1.Of course, you need to remember that lower leverage also means lower risk of amargin call, but it also means that you will get a lower bang for your buck (and viceversa).Basically if you have limited capital, you need to make sure that your brokeroffers high leverage.If capital is not a problem, you can rest assured that any broker that has a widevariety of leverage options should suffice. A variety of options lets you vary theamount of risk you are willing to take. For example, less leverage (and therefore lessrisk) may be preferable if you are dealing with highly volatile (exotic) currency pairs.

Account Types

Many brokers will offer you two or more types of accounts. The smallest account isknown as a mini account and it requires you to trade with a minimum of maybe $300.This offers you a high amount of leverage (which you need in order to make moneywith so little initial capital). The standard account allows you to trade at a variety ofdifferent leverages, but it also requires a minimum initial capital of $2,000 to get youstarted.Lastly, there are premium accounts, which often require significant amounts ofcapital to get you started. It also lets you use different amounts of leverage and oftenoffer additional tools and services. You will need to make sure that the broker youchoose has the right leverage, tools, and services that are relevant to the amount ofcapital that you are able to work with.

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