Posted by forex at 6:51 AM
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1. Acquaint yourself with the basics of Forex transactions. Currencies always trade in pairs. You buy one currency with the other. A currency exchange rate is simply the amount of one currency it takes to buy a given amount of the other. Currency pairs are always quoted with a 'base currency' listed first. This is followed by a number that tells you how many units of the second currency are required to buy one unit of the base currency. For example, EUR/USD = 1.3515 means it costs $1.3515 to buy one euro.
2. Study how the Forex market works. Currency rates change in the short term based on market trends (called Forex signals). If most traders think an exchange rate is trending in a certain direction, their trading patterns will reinforce the trend. In the longer term, currency exchange rates respond to larger economic forces like central bank policies, inflation and interest rates, and the balance of trade between nations.
3. Deal only with authorized Forex brokers. Authorized brokers are required to adhere to specified standards that ensure you are treated fairly. In the United States the National Futures Association is the primary body that sets standards and awards authorized status.
4. Open a practice account. Many of the best Forex brokers offer these free accounts. You don't use real money so there's no risk. The practice accounts allow you to make mock trades using real market information so you can learn the trading process and experiment with different Forex trading strategies.
5. Start small with a Forex mini account. Mini accounts are intended for beginning Forex traders. The mini account lets you trade lots of currency of around $10,000 instead of the standard $100,000. This reduces your risk by a factor of 10. Because Forex trades are carried out with very low margin requirements (the amount of money you have to put up), you can get started with a mini account with as little as $100.