Getting Into The Lucrative World Of Forex Trading

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For many years the foreign exchange market was the preserve of major players such as national banks and multi-national corporations. In the 1980s however new rules were introduced which permitted smaller investors to enter the market through a margin account. In simple terms, a margin account allows you to trade with more money than you actually have in your trading account. For example, a 100:1 margin account allows you to participate in trading up to $100,000 with an investment of only $1,000.

Now, although this entry level has clearly opened up the market to the smaller investor, care needs to be taken as Forex trading is not an easy undertaking and is certainly not without its risks. For this reason the very first thing that any novice trader needs to do is to sit down, study the foreign exchange markets carefully and learn the ins and outs of trading before putting any money at risk.

In addition to some basic training, the newcomer will also need to find a good broker as all trading must be conducted through a broker. Here a personal recommendation is often the best place to start but, in the absence of this, you should choose a broker who is registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM). This will provide you with protection against both abusive trade practices and fraud.

It is normally a fairly simple process to open an account with a broker and once this has been done and funds have been added to your account you can begin to trade. Brokers will normally offer a number of different accounts to suit individual clients and most will have "mini Forex accounts" which will allow you to begin trading with as little as $250. The margin on which you the broker will permit you to trade will vary from one account to the next.

One thing that you should always look for when your are selecting a broker is the ability to cut your teeth by carrying out simulated, or paper, trades for a reasonable period of time. This is a facility which the vast majority of good brokers will provide and which simply allows you to trade in the normal manner but to do so on paper and without any money changing hands until you have found your feet. Many of the online brokers provide simulated trading accounts which allow you to make free paper trades for up to 30 days.

One of the things which worries a large number of newcomers to the world of Forex trading is the subject of trading charges and brokerage fees. Unlike many of the other markets, the Forex market is free of commission and so you can make as many trades as you like without worrying about running up huge brokerage fees. Your broker will make his profit from the 'spread' on each trade, which is simply the difference between the buying price and the selling price of a currency pair and is a subject all of its own.
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