How To Start Trading The Forex Market
The greatest thing with trading the FX market is the the margin, amount of money needed to place trade, is all that can be lost
You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $1000 the broker will allow you to trade like you really have $400.000.
FX trading doesn't have the risk involved that stock and future trading does, where it is possible to lose more money than you have in your account
This type of LEVERAGE does NOT EXIST in the equities or futures market. Equities and Futures can be very volatile with whip saw movements where the potential for loss is greater, even when placing stop loss measures
Your position may be liquidated at a loss, and you'll be liable for any resulting deficit in the total.
With the convenience of around the clock trading and large volume in the forex market potentially hazardous gaps in the market price and very little movement are pretty much non-existent.
Orders are executed quickly,without slippage or partial fills.When you take a trade it is filled straight away with no short fills. And finally, there are no margin calls. A broker will protect your account if your trade drops under the margin level needed to hold your trade automatically This is like having your own automated stop-loss measures working for you.
Currencies are traded in dollar amounts called " LOTS"
In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.
One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.
This does not mean you are able to trade $100,000 with $250
Be warned your account must be more than $250 For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13. Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.
If you would close this trade immediately, you have to sell it at 112.10 (the bid price), for a loss of $ 30.
In fact you could not get executed on this trade, as the brokers trading platform would reject your order,
for the reason of having insufficient funds in your account).
This means your account would in fact need to be $280, $250 for he margin and $30 for the trade
BUT....IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.
I will explain later about having an adequate account size to trade the Forex Market.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.
The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Some of the most common symbols used in Forex are:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound or cable
JPY - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
above is a list of the most commonly traded currencies
A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.
Some of the most traded currency pairs are:
EUR/USD Euro against US Dollar
USD/JPY US Dollar against Japanese Yen
GBP/USD British Pound against US Dollar
USD/CAD US Dollar against Canadian Dollar
AUD/USD Australian Dollar against US Dollar
USD/CHF US Dollar against Swiss Franc
EUR/JPY Euro
against Japanese Yen
The currency left of the / is called the base currency.
The currency right of the / is called the counter currency.
When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.
If you were to sell the pair, you would be selling the
EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.
The best way to remember is, by just thinking of the entire currency pair as one item.
If you buy it...you buy the first currency and sell the second currency. If you sell it...you sell the first
currency and buy the second currency.
That means you would to be able to short-sell with no restrictions so you could make money when the market drops
as well as when it rises.
The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Checkout more here: [http://www.currencymoneyfinance.com/blog/]
You have to know, that despite the super-high leverage offered by some Forex brokers up to (400:1); meaning if you put up $1000 the broker will allow you to trade like you really have $400.000.
FX trading doesn't have the risk involved that stock and future trading does, where it is possible to lose more money than you have in your account
This type of LEVERAGE does NOT EXIST in the equities or futures market. Equities and Futures can be very volatile with whip saw movements where the potential for loss is greater, even when placing stop loss measures
Your position may be liquidated at a loss, and you'll be liable for any resulting deficit in the total.
With the convenience of around the clock trading and large volume in the forex market potentially hazardous gaps in the market price and very little movement are pretty much non-existent.
Orders are executed quickly,without slippage or partial fills.When you take a trade it is filled straight away with no short fills. And finally, there are no margin calls. A broker will protect your account if your trade drops under the margin level needed to hold your trade automatically This is like having your own automated stop-loss measures working for you.
Currencies are traded in dollar amounts called " LOTS"
In Forex trading, with most Brokers, you have the choice between 2 different lot sizes.
One Standard lot is equal to $100,000 in currency. The margin requirements, using a 400:1 Leverage, would be US$ 250, in other word you control $100,000 worth of currency for only 250 US dollars.
This does not mean you are able to trade $100,000 with $250
Be warned your account must be more than $250 For example, if you place an order to buy 1 Standard lot ( @100,000) of USD/JPY and USD/JPY is quoted as 112.10/112.13, you buy USD/JPY at 112.13. Your account balance would be $220, because you paid 3 pips or $ 30 for this trade.
If you would close this trade immediately, you have to sell it at 112.10 (the bid price), for a loss of $ 30.
In fact you could not get executed on this trade, as the brokers trading platform would reject your order,
for the reason of having insufficient funds in your account).
This means your account would in fact need to be $280, $250 for he margin and $30 for the trade
BUT....IF, after you have initiated the trade to buy USD/JPY at 112.13, and the USD/JPY falls the next second 1 pip ( approx. $8), your position would be closed automatically, because of margin deficit.
I will explain later about having an adequate account size to trade the Forex Market.
Currencies are always traded in pairs in the FOREX. The pairs have a unique notation that expresses what currencies are being traded.
The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for a currency pair. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.
Some of the most common symbols used in Forex are:
USD - The US Dollar
EUR - The currency of the European Union "EURO"
GBP - The British Pound or cable
JPY - The Japanese Yen
CHF - The Swiss Franc
AUD - The Australian Dollar
CAD - The Canadian Dollar
above is a list of the most commonly traded currencies
A currency can never be traded by itself. So you can not ever trade the USD by itself. You always need to BUY one currency and SELL another currency to make a trade possible.
Some of the most traded currency pairs are:
EUR/USD Euro against US Dollar
USD/JPY US Dollar against Japanese Yen
GBP/USD British Pound against US Dollar
USD/CAD US Dollar against Canadian Dollar
AUD/USD Australian Dollar against US Dollar
USD/CHF US Dollar against Swiss Franc
EUR/JPY Euro
against Japanese Yen
The currency left of the / is called the base currency.
The currency right of the / is called the counter currency.
When you place an order to buy the EUR/USD, for instance, you are actually buying the EUR and selling the USD.
If you were to sell the pair, you would be selling the
EUR and buying the USD. So if you buy or sell a currency PAIR, you are buying/selling the base currency.
The best way to remember is, by just thinking of the entire currency pair as one item.
If you buy it...you buy the first currency and sell the second currency. If you sell it...you sell the first
currency and buy the second currency.
That means you would to be able to short-sell with no restrictions so you could make money when the market drops
as well as when it rises.
The problem with traditional stock market or commodity trading is that the market has to go up for you to make money. With FOREX trading you can make money in all directions.
Checkout more here: [http://www.currencymoneyfinance.com/blog/]