Basic Tips on How to Trade In the Foreign Exchange Market

Forex trading beginner tips and clarifications

Forex trading is great not just for advanced traders, but for beginners as well. It offers accessibility, liquidity, and leverage. You do not have to shell out a huge amount of money to trade. You can start with a small capital. You can actually begin trading currencies with a $100 deposit.

No deposit account conditions

With most brokers, there are no deposit accounts necessary. So, you can start with zero funds. However, you may have to register for a lifetime trading account that contains $25 to $50 free money. You can only make a withdrawal after trading a certain volume. Nonetheless, your account would remain live.

Before you endeavour into forex trading, even paper trading for beginners, you need to learn some basic tips to help you start understanding the foreign exchange market.  (Image by Pixabay.com)

Trade anytime

The foreign exchange market is very liquid. The constant supply and demand for money just never runs out. The market is actually open twenty-four hours, five days a week. You can trade anytime during the weekdays, but not on the weekends. This is great since you do not need to adjust your schedule. You can trade after work hours or in the evening, for instance.

Employ leverage

Keep in mind the general rule of thumb in Forex trading: the larger your capital, the larger your trade size, it is important for you to have leverage. When you employ leverage, you can sell or buy up to five hundred times more funds than what you have. This would allow you to generate more gains even if you do not have a huge capital.

Discuss leverage with your broker

Once you start trading with a particular Forex broker, you may want to consider modifying your leverage level. You have to discuss this with your broker, however. Ideally, your broker should let you use an industry standardized procedure as well as choose your account and change your leverage from there. Keep in mind that your leverage is linked to your account deposit level. Sometimes, when you deposit additional funds to your trading account, your currency trading leverage is reduced.

Trading currency pairs

Note that Forex is also traded via currency pairs. You do not simply trade Canadian or US dollars. You trade two different currencies. You can trade euro quotes against US dollars, EUR/USD for example. When you do this, you trade US dollars for euros and your account holding currency does not even matter. You should know about the international code specifying currency pair setup.

Currently, the strongest and most dominant currency is the US dollar. It is also the most widely traded because it is the most preferred reference in many currency exchange transactions all over the globe. Anyway, with more than two hundred countries, you can only find several currency pairs to trade. You should choose the currency pairs that can deliver the best results. Some of the most popular currencies include the US dollar (USD), Australian dollar (AUD), Canadian dollar (CAD), Euro (EUR), Swiss franc (CHF), Japanese yen (JPY), and British pound (GBP).

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