ForexKnowledge.com | THE Place for FOREX Information





Home Quotes & Charts Free Guides Education Center Brokerages Trading Tools/Strategies News

What is Forex Trading

How to get started in Currencies

History of Forex

A Primer On The Forex Market

Forex vs Futures

Forex Introduction

Forex vs Stocks

Getting Started in Forex
VIEW MORE INTRO TO FX..

What is a PIP?

Country Currency Codes

Reading Prices

What Pairs are Traded?

Forex Glossary

FX Publications
VIEW MORE FUNDAMENTALS..

Speculating

Risk Awareness

The Spot Market

The Forces of Forex

Market Snapshot
VIEW MORE MARKET INFO..

Fibonacci Numbers

Advanced Indicator Manual

Trading Systems which work

Demo Before You Dive In
VIEW MORE TECHNICAL..

Risk Probability Calculator

Pivot Point Calculator

Economic Calendar

Interest Rates Calendar

Real-Time FX Charts

Live FX Prices & Quotes

Forex Movers & Shakers
VIEW MORE TRADING TOOLS..

Keep An Eye On Momentum

Is Guessing a Strategy?

Trading On News Releases

The Memory Of Price

Trading Trend Or Range?

Pivot Strategies: A Handy Tool
VIEW MORE STRATEGIES..

Getting Started in Forex (Continued...)
This article is reproduced with the permission of Investopedia.com.

Wide Range of Leverage Options - Leverage is necessary in forex because the price deviations (the sources of profit) are merely fractions of a cent. Leverage, expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. For example, a ratio of 100:1 means your broker would lend you $100 for every $1 of actual capital. Many brokerages offer as much as 250:1. Remember, lower leverage means lower risk of a margin call, but also lower bang for your buck (and vice-versa).
Bottom line: If you have limited capital, make sure your broker offers high leverage. If capital is not a problem, any broker with a wide variety of leverage options should do. A variety of options lets you vary the amount of risk you are willing to take. For example, less leverage (and therefore less risk) may be preferable for highly volatile (exotic) currency pairs.

Account Types - Many brokers offer two or more types of accounts. The smallest account is known as a mini account and requires you to trade with a minimum of, say, $250, offering a high amount of leverage (which you need in order to make money with so little initial capital). The standard account lets you trade at a variety of different leverages, but it requires a minimum initial capital of $2,000. Finally, premium accounts, which often require significant amounts of capital, let you use different amounts of leverage and often offer additional tools and services.
Bottom line: Make sure the broker you choose has the right leverage, tools, and services relative to your amount of capital.

Things To Avoid

Sniping or Hunting - Sniping and hunting - or prematurely buying or selling near preset points - are shady acts committed by brokers to increase profits. Obviously, no broker admits to committing these acts, but a notion that a broker has practiced sniping or hunting is commonly believed to be true. Unfortunately, the only way to determine which brokers do this and which brokers don't is to talk to fellow traders. There is no blacklist or organization that reports such activity.
Bottom line: Talk to others in person or visit online discussion forums to find out who is an honest broker.

Getting Started in Forex is continued on the next page, please click here.

Disclaimer: Trading Futures, Options on Futures, and off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.