Posted by forex at 3:18 AM
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1. Familiarize yourself with the technical jargon and terminology. In order to communicate with traders and for the purpose of information-gathering you will need to familiarize yourself with the forex lingo. In order to trade in forex, you will have to be able to read a currency quote. Currencies are usually traded in pairs containing the base and quote currency. You should be able to define a currency quote and be able to know which is the base and which is the quote currency in a forex quote.
2. Know your currency. Research which currency pairs work together and which currency pair is frequently traded. In addition to this, it is also important to research which currency pairs are hedged together. Gathering information on the factors that affect the trend of each currency pair is paramount. These factors include things like rate of unemployment, a country’s GDP and interest rates.
3. Learn when the most lucrative markets trade and develop a trading plan. A trading plan is key–trading currencies without a trade plan will lead to inconsistencies in trading, because your trades may then not be based on fundamentals but rather on market sentiments and emotions.
4. Look for a reputable forex broker who will give you the best deal. It is essential to invest time in shopping for different brokers, because each will give you different spread rates. You need to pick a broker who gives you the tightest spread and the lowest pips.The spread is the difference between the buy price and the sell price. Spread is quoted in pips, which is the smallest price increment that is used in forex trading. (Pip stands for percentage in point).
5. After identifying a forex broker who meets your needs; you will then have to download the trading software that you will be using to execute your trades.
6. Decide how much you want to deposit with your forex broker and decide what your leverage should be. Leverage is a 'loan' or credit that is provided to you by your forex broker. When you trade in currencies, leverage enables you to trade in amounts 50 to 400 times more than you actually deposited.Avoid going for very high leverage. This is because high leverage is a double-edged sword. While it amplifies your chances of gaining big, it also amplifies your chances of losing big.
7. As you trade currencies, always get the most current news and updates that have a direct impact on the currency pair you are trading.