Posted by forex at 2:19 AM
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1. Open and fund a trading account with a retail forex broker. Typically, this involves filling out an application and providing basic information about your personal finances. Once your application is approved, fund your account to begin forex trading.
2. Choose the leverage and contract size you want to use when trading. Leverage is a ratio measuring how much margin you have to invest to trade a forex contract. For example, if you use 20:1 leverage, you only need $5,000 to trade a contract worth $100,000. Other popular forex leverage ratios include 10:1, 30:1, 50:1 and even 100:1 and up, depending on the forex broker. Higher leverage allows you to trade with a smaller margin and also increases potential returns and losses on your margin.A standard contract in forex represents 100,000 units of the quote (second) currency. However, there are smaller contracts representing 10,000 or even 1,000 units of currency. If you are a beginner, it might be helpful to start out trading smaller contracts and moving up to larger contracts once you feel comfortable trading.
3. Understand currency pairs. Each individual market within forex measures the value of one currency against another. For example, the EUR/USD measures the value of the euro in terms of US dollars. Some other markets include the USD/JPY (dollar/yen), GBP/USD (pound/dollar) and USD/CHF (dollar/franc). The order of the currencies is important, because the pair always indicates the market is tracking the value of the first currency in terms of the second.
4. Place trades. In forex, you can buy or sell any currency pair. For example, if you buy a GBP/USD contract, you are betting that the pound will rise in value against the dollar. On the other hand, you should sell the pair if you expect the pound to drop against the dollar. To close a trade, enter an offsetting order. In other words, sell if you bought to open and buy if you sold to open.