The fx market is a great place for individual players, large and small, to enter into thrilling, fast-paced and potentially profitable trades. But you cannot participate in forex currency trading if you don't first have a forex brokerage account. Whilst many stockmarket brokerages allow you to also trade other financial instruments, fx brokerage accounts deal only with trading currencies.



Leverage

One of the benefits of currency trading is the tremendous amount of leverage. Typical ratio is 100:1, meaning for every $1 in your trading account, you can purchase up to $100 in currency. $1000 would thus allow you to trade $100,000 in currency.

Next, you need to determine on how much leverage to apply for. Leverage is offered based on your credit, so if your credit is pretty low, you may need to consider just 50:1 leverage. This still gives you a lot of room to profit but limits your risk.

Spreads

The good news is that there are no commissions on forex transactions. The unfortunate news is that, like the stock market, fx currency pairs do have a spread. This means that a market maker will pay less for a currency than he/she is willing to sell the currency for. These spreads are small, usually less than 0.05 cents. However, the wider the spread, the more it will cost to trade.

Further Factors

First and most important among other considerations are the different pairs that any brokerage trades with. Virtually every forex brokerage handles the main currency pairs:

U.S. dollar

Euro

British pound

Australian dollar

New Zealand dollar

Canadian dollar

Swiss franc

Japanese yen