Apr 29 2013
Both veteran and novice traders of the stock market find that trading in foreign currency exchange, commonly referred to as Forex, is really attractive. The basic difference between stock market and Forex market is that one can trade in the latter market at any time of the day as it remains open 24×7. And this is what allures new traders; they can maintain their regular job while practicing trading.
If you’re interested in Forex trading, you should know basic things related to it before you kick in and here they are.
- Capital – This is perhaps the most important and imperative requirement for trading in the Forex market. Unless you have adequate amount of capital to invest and make the trades, you can’t expect significant profit. You should have enough money to trade currencies, i.e., to buy and sell currencies. The amount, however, depends on your personal ability and your chosen type of Forex account. In the U.S., the traders are allowed to make purchase of up to 50 times of the amount of money they have cash in their trading account. And this is what referred to as leverage in the trading industry. For example, if you want to make a purchase of 100,000 dollar worth of your currency, you just need to keep 2,000 dollar in your account. Some brokerage firms offer the facility of ‘micro’ accounts in which you can keep as little as only 50 dollar and buy 2,500 dollar of currency.
- Trading platform – You can’t place a trade or a bid without electronic access to your broker. So you must have a PC or laptop with Internet connection. The entire industry is operated electronically and almost all brokerage firms are specialized in creating their own software to execute trading orders placed by the customers. You may try different programs offered by different brokerage company for free of cost by simply opening an online demo account. They would help you know the major features of their trading software and help you find an interface which suits you the best.
- Trading price charts – Like other traders, you can also rely on the price charts while making any trading decision. The Forex industry is highly chart-driven as the fundamental and economic data are not so easy to access and to understand especially when it comes to trading currencies. However, it doesn’t happen with stock trading. Companies issue quarterly income reports on the health of the business and this has major impact on stock prices. A similar means of updated information on any particular currency is not available and thus the Forex traders depend on the charts to find clues on potential value of the currency. Therefore, accessing the charts is the fundamental requirement of Forex trading.
- Considerations – Many individuals who have opened a Forex account recently have a notion that if they have the right instruments and money in pocket, then they can easily trade in Forex market and make significant profit. However, in reality, the market is extremely volatile and because of high leverage facility, it is considered as one of the riskiest trading platform. So, being a new trader, you must spend some time on practicing the strategies with very little to no money involved. Major brokerage firms of the country provide the new customers with the facility of simulation accounts so that they can trade with virtual money. You should take advantage of it to practice and enhance your trading skill beforehand, and start trading just like an efficient Forex trader.
Discussed above are some of the very important factors that you must take care of while trading in the Forex.