Posted by forex at 6:14 AM
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1. Review your personal finance situation before you consider investing significant funds in foreign exchange. If you have enough savings to take care of yourself for a significant amount of time, have a steady source of employment and low debts, then it may be a sensible choice. If not, then you might not be able to afford the risk.
2. Open a foreign exchange account appropriate to the amount of money that you can afford to risk. Ordinary foreign exchange accounts have high position requirements, which otherwise obligate you to use massive amounts of leverage to meet them. Leverage means borrowing money from your brokerage temporarily to bolster your trading position. For most investors, sticking to a mini or micro foreign exchange account is best, because it allows you to use lower levels of leverage and to risk less money in any single trade.
3. Invest in foreign currencies for the long term if your intention is to hedge against inflation. Many foreign exchange traders prefer to be extremely short-term traders, in part because the market moves so slowly. Only during substantial market moves do long-term foreign exchange investors earn much money. It's best to avoid using leverage above 5:1 unless you're well capitalized and have substantial experience in foreign exchange trading.