An Introduction to Forex Trading Forex Trading is trading currencies from different countries against each other. Forex is acronym of Foreign Exchange. For example, in Europe the currency in circulation is called the Euro (EUR) and in the United States the currency in circulation is called the US Dollar (USD). An example of a forex trade is to buy the Euro while simultaneously selling US Dollar. This is called going long on the EUR/US How Does Forex Trading Work? Forex trading is typically done through a broker or market maker. As a forex trader you can choose a currency pair that you expect to change in value and place a trade accordingly. For example, if you had purchased 1,000 Euros in January of 2005, it would have cost you around $1,200 USD. Throughout 2005 the Euro’s value vs. the U.S. Dollar’s value increased. At the end of the year 1,000 Euros was worth $1,300 U.S. Dollars. If you had chosen to end your trade at that point, you would have a $100 gain. Forex trades can be placed through a broker or market maker. Orders can be placed with just a few clicks and the broker then passes the order along to a partner in the Interbank Market to fill your position. When you close your trade, the broker closes the position on the Interbank Market and credits your account with the loss or gain. This can all happen literally within a few seconds. Tips for online forex trading • Start trading forex with a demo account before you invest real capital. That way, you can get a feel for the process and decide if trading forex if for you. When youre consistently making good trades on demo, then you can go live with a real forex account. • Limit your losses. Lets say that you invested $20 in EUR/USD, and today, your total losses are $5, you woudnt have lost money. It is important to use only about 2% of your funds per trade, combining the stop-loss order with those 2%. Having enough capital to cover the downside will allow you to keep your position open and see profits. • Try to focus on using only about 2% of your total cash. For example, if you decide to invest $1000, try to use only $20 to invest in the currency pair. The prices in Forex are extremely volatile, and you want to make sure you have enough money to cover the down side. • If your currency pair goes against you and you dont have enough money to cover the duration, you will automatically canceled out of your order. Make sure you dont make this mistake. • Remember that losses arent losses unless your position is closed. If your position is still open, your losses will only count if you choose to close the order and take the losses. nordfx/?id=244815
Posted on: Thu, 14 Nov 2013 04:17:18 +0000
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