Without a doubt, Forex is gaining its popularity fast against other kind of trading. No limited market access, no liquidity issues-after market hours, zero commission fees, low capital requirements with high leverage rates, and no restrictions on short selling -- Forex can be very beneficial to a variety of people.
Before you get started, it is wise to plan well. If you fail to plan, you plan to fail. A trading plan is especially crucial in Forex trading to stay 'in-control' against the emotional stress in speculative situation. Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed.
If you are very new to Forex trading, we suggest steps as below:
1. Learn how to trade Forex.
Like any other trading business, if you are new to it, best advice you can get is to learn and practice more before you test your 'wings'. Seminars, eBooks, Internet, papers, video courses - all these are helpful to raise your confidence level before you trade with your real hard-earn dollars.
To have some feelings on the reality, beginner traders should start with demo account and paper trade Forex. Treat demo account's play money as real money and trade with cautions. Some traders never take their demo account money seriously. In return, they became ignorance in studying the numbers and do not take win/loss seriously. This may turn into a very bad habit which then caused bad effects on one's trading skills.
2. Selecting a Forex broker.
There are many Forex brokers to choose from, just as in any other market. When you are browsing for Forex, ask questions below:
Does the FX broker offer low spread value? Is the FX broker registered with related authorizations such as FCM? What kind of tools does the FX broker provides? What kind of margin options are there? Does the FX broker provides live customer supports? Does the FX broker offers demo account for beginner traders?
If you do not have sufficient capital, check whether the FX broker offers mini account that requires low startup funds.
Getting a good and reliable Forex brokers is very crucial. In fact they may be the one who affect your winning or losing. Besides being honest in every transaction with you, a good dealer should also provide professional advice, appropriate trading system, as well as related education. All these are useful in maintaining your risk which then secures your win in Forex trading.
3. Avoid Forex trader's common mistakes.
Avoid trading with your emotions, avoid over trading your account, avoid over-staying at your positions, avoid bad money management, avoid risking what you cannot afford in Forex trading, avoid a margin call ...Forex trading involved a lot of risks and there are lots of mistakes that small investors like you and me cannot afford to make.
One of the key mistakes among Forex traders is overleveraging.
Leverage is the key for profiting in Forex. Forex dealers often allow their clients to trade with high margin. Margin trading refers to the leverage amount given to the traders to make purchase in the FOREX market. Typical FOREX margins can go up to 100 to 1 or even 200 to 1 where traders are given the power to buy 100 to 200 times more than what they can afford. With high leverage rates in Forex market, traders often find themselves controlling a big sum of money with a little cash put on the table.
Yes, margin trading might sounds attractive as 1,000 cash in a 200 to 1 margin rates account will have the power of purchasing currency worth $200,000. It magnifies the ROI of the trades with less money outlay on the table. But, as most experts say, leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns. Not to forget the market does not always go in the direction you want, leveraging can magnifies your ROI in your Forex trade but it as well can turn your losses big.
With the explanation given to the general issues of Forex trading, I hope that you get what you want to read about Forex trading. The return of FOREX trading can be very lucrative but the risk lie beneath is equally great. Invest smartly, and I wish you all the best in the trading world.
Teddy, experienced writter and webmaster. Check out his new work and get basic Forex education at http://www.golearnforex.net