Posted by forex at 8:41 AM
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1. Understand currency pairs. Currency is quoted in relative values against another unit of currency. The first or reference currency is called the quote currency and quoted in relation to the second or base currency. For instance in the quote '1.8500 EUR/USD', EUR (euro) is the quote currency and USD (U.S. dollar) is the base currency.
2. Understand pricing. If the EUR/USD moves from 1.8500 to 1.8510 it is considered an increase in the value of the euro and a decrease in the value of the dollar. However, if the currency pair moves from 1.8500 to 1.7990, it is considered a decrease in the value of the euro and an increase in the value of the dollar.
3. Understand the term 'majors.' This refers to the most heavily traded currencies in the world: the euro, U.S. dollar, Japanese yen, pound sterling, Australian dollar, Canadian dollar, and the Swiss franc.
4. Open a virtual account. A virtual account is a 'dummy account' in that it is not real. Any reputable currency trading platform will allow you to test the software (trading platform) with a virtual account before funding your account with real currency.
5. Look for low spreads. The spread is the difference between the price at which the currency can be purchased and the price at which it can be sold. The lower the spread, the lower the commission charged on each trade.
6. Start with very little leverage. Currency accounts can be leveraged as much as 200 times (200:1). This means that you are given $200 to trade with for every dollar invested. Start with 10 times leverage (10:1) and then work your way up once you begin to show consistent profits.