Posted by forex at 5:24 AM
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Forex Trading: Right For You?
1. Traders can either trade forex in pairs, such as the Euro/US dollar, or options on a currency's spot closing price. The latter type of trading functions just like traditional options trading, only with a select currency as the underlying security.
2. Do some research and studying on the style of trading you've selected. If you decide to trade pairs, review charts of the various pairs and how they move throughout the trading day.
3. Understand the use of leverage in this type of trading. When trading forex, an investor may only deposit $1,000 into his trading account, but due to the use of leverage, the investor may be able to trade up 100 times his deposit amount. Unfortunately, the use of leverage also the means the potential for big losses.
4. Know the difference between technical and fundamental trading. Technical traders use charts and graphs to predict where currencies are going. Fundamental traders trade around important news events such as GDP releases, unemployment data and central bank rate decisions.
5. Understand pips. This how the bid/ask spread between a currency pair is calculated and how a trader calculates profit and loss. One pip is equal to $10 on one standard forex lot.