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Currency Trading Tips For Beginners In Forex
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Currency Trading Tips for Beginners In Forex

Of the many questions that come to mind for those who are just getting started with forex trading is one of the most basic and important question about investments. What capital or investment is ideal to trade forex in.

Well the answer to that could vary based on the forex broker you want to trade with and the type of trading platform you will trade on. However, that being said, today there are forex brokers that allow trading from just $1. Attractive as it may seem, it can get a bit tedious especially if you want to make some big trades. Further more, trading with $1 won't get you nowhere, but in the same note, trading the live markets with $1 is better than trading on a demo account with $50,000 of fake money.

Forex brokers, have aptly understood the market requirements which is why most of them now offer micro accounts where the minimum investment starts with a reasonable $100. This makes for an ideal investment as traders can make use of leverage in order to trade the markets. So in effect, with a 1:300 leverage you are magnifying your investment 300 times. Bear in mind though that the use of leverage can be risky. On one hand while leverage can get you access to higher investment without having to deposit the actual funds, should you lose, the risks of lost capital will be just the same; i.e: 300 times. So when using leverage make sure that you know what you are doing. To be reasonable, using a leverage of 1:50 or 1:100 is the most ideal leverage especially for those getting started with forex.

Beginners in forex should also have a clear understanding of the forex broker types. Primarily classified into market maker and ECN, one offers fixed spreads and make their own markets while the latter offers direct access to their trading network and charge commissions on every trade that you make. Beginners should opt for a market maker as they offer fixed spreads and also the initial investments required by them are within reason. Once beginners in forex get a feel for the markets, it would be best to switch to an ECN forex broker in order to truly experience the global markets.

The spreads offered by a market maker type of broker is nothing but the difference between bid and ask and varies from one broker to another. Choosing a forex broker that offers one of the most competitive spreads along with the option to create a micro account would be the best place to start.

What to look for when starting to trade forex

Currencies: In forex, currencies are traded in pairs and made up of major, cross and exotic pairs. The major currency pairs include the EUR/USD, USD/GBP, USD/JPY and so on. These are the most commonly traded pairs and hence the name majors. Exotics include SAR/TRL, etc and so on while cross currencies include one major (exclusind USD) and one exotic currency.

When looking for spreads, focus on the majors are this is commonly used by most forex brokers and hence can be a benchmark to compare different brokers in regards to the spreads that they offer.

Forex for Beginners - Trading Styles and Strategies

For most traders getting started with forex trading, it can be hard to start following a trading style or strategy. That being said, the best way to start off is to learning how to read the charts. Trading with the charts is one of the most basic way to trade and once you get the hang of it, it can be quite easy to understand. Charts give a lot of information and can help you make the right trading strategies.

Choosing a "time frame" while trading is also important. Whether you want to go long, medium or short, the timeframe chosen to trade can play a big role. For beginners, it is recommended to trade short as this is more simple and can allow you take some profits (although small profits). Trading during non volatile hours is a good practice as there is less volatility and hence increases your chances of making profits. However, bear in mind that the profits you will make can be small, but that's the whole point of trading forex especially for beginners. You start small and steady and slowly scale your way up.

Note that just because you make profits a few times or managed to successfuly trade for a month taking profits doesn't make you a professional. It takes months if not years to develop the strategies to a point that you are confident to trade big amounts, upwards of 5k or more.

Besides the above, beginners in forex also need to focus on fundamental and technical analysis. This basically gives you deeper understanding into trading forex and understanding how the markets behave and the factors that influence the currency pairs.

Forex trading is risky but at the same time offers great potential to make money. The problem with most traders starting off with forex is that greed takes over or they tend to get impatient thus ending up losing all their capital (irrespective of how small it is). Due practice with a lot of patience can help beginners in forex to get started with forex trading and set themselves on the path to a successful trading experience.

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