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Crash Course In Forex Education - What You Need To Know To Get Started

Nick Makaryk
Jun 17, 2008
The foreign currency exchange, or Forex, is about trading money. Currency from every country is traded, sold and bought. Anyone can buy and sell money on the Forex and may come out ahead. For example, you might buy a Japanese Yen when the ratio is right, then sell the yen to buy American dollars for a profit. You can deal with any currency in the world you like. You don't have to buy American dollars; you can trade the yen for rubles, as an example.

For most people, the stock market is what comes to mind with they think of buying and selling for profit. But, the Forex has become increasingly popular in recent years. The reason for this is because the Forex is a much more liquid than the stock market. That means there is a lot more actual money being traded everyday. Also, the Forex never closes because the transactions are taking place all over the word between banks and brokers, this provides twenty-four hour access to trading during the business week.

With experience in Forex, comes understanding. As you gain knowledge, you will see that another difference between it and the stock market is that Forex has much higher leverage. Also, it is important to note that the potential for profit is much higher with Forex, but the losses may be much higher as well. Make sure you educate yourself on the risks and rewards of this kind of trading before you put a lot of money into it.

When you are just getting started with Forex, it is not unusual for brokers to offer a service using a mini-Forex system. This allows you to get the swing of things while not putting a lot of risk into it. The mini-Forex has a smaller minimum deposit, usually around $100. It is highly advisable to use a broker when you get into this type of trading because of its complex nature.

Because there is so much terminology when dealing with Forex, learning to effectively trade can be complicated to the new comer. There are a lot of abbreviations and symbols used and it is important to familiarize yourself with these before you get started. For example, "usdjpy" may look like a typo, but it actually stands for "US Dollars Japanese Yen." The terms are all going to be in two parts, both representing a form of currency.
There are numerous books and websites that are exclusively for teaching traders the 'rules' of Forex.

Working with a broker when investing in Forex is usually a very good idea. They are professionals and this is how they make their living. When it comes to the ins and outs of Forex, their knowledge and experience is invaluable. There are several factors to watch for when selecting a broker to work with. You want to find one who offers low spreads. A spread is calculated in pips. Pips is the difference between what you paid for the currency and what you can sell it for in any given moment. Forex brokers don't work on commission; they make their money of the difference, or the spread. Talk to several brokers before picking one. Compare what kind of spreads they work on.

Backing from a well known financial institution is also an important thing to check when looking for Forex broker. If you cannot find an affiliation between a bank and the broker you are looking at, keep looking for a broker. Not only should they be with a larger bank, but also they should also be registered as a Futures Commission Merchant (FCM) and is regulated by the Commodity Futures Trading Commission (CFTC). Checking these two associations will help ensure that you are doing business with a reputable broker who is also experienced in trading Forex.

Also, check to see what kind of tools the broker has. He should have access to real time data on charges, graphs, and spreadsheets for Forex so the information he is working with is accurate. Outdated or incorrect information will only cost time and money. Also, make sure that the broker offers a large range of account options. They should have accounts available that are smaller and have smaller minimum deposits. Also, large accounts and ones in between called standard accounts. This will allow you to trade at a leveled where you feel comfortable
About the Author
Nick Makaryk is an Internet Publisher, Copywriter, and Founder of Best Credit Cards A Free consumer credit card comparison site helps consumers find the Best Credit Card while avoiding high interest rates, charges, and fees.
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