Forex trading is both exciting and lucrative and, since rules were changed to allow small investors to participate in the market by trading on margin accounts, it has attracted a huge number of very happy small investors who today trade at a time suit themselves from the comfort of their own homes. But Forex trading is not quite as simple as many people think and you will need to invest quite a lot of time and a little bit of money in some good training before you embark on any sort of live trading.
One of the first things that you will need, once you have acquired some basic knowledge, is a broker who will handle your transactions for you. The vast majority of brokers are reputable individuals who are associated with a major financial institution, such as a bank, and are registered, in the United States for example, as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC).
Having found a broker you can then open a Forex trading account by simply filling in a form and producing proof of your identity and then fund your account and start trading. When you open your account the terms under which you can trade on your account will be clearly specified and one point to note is that you will be subject to a margin agreement which will allow the broker to intervene in any trade which he considers to carry too high a risk. This is reasonable enough since when you are trading on margin you are essentially trading with the broker's money and not your own money.
You will find that most brokers will offer a range of accounts to suit individual investors and one of these accounts is commonly referred to as a mini account which normally allows you trade with as little as $250, as opposed to the $1,000 to $2,500 usually required for a standard trading account. You will also find that leverage varies from one account to the next and from one broker to the next. Leverage simply allows you to trade with more money than you have in your account and the higher the leverage the larger the trading lots you can participate in.
Perhaps the most important thing to look for though as a novice trader is the ability to start by simply trading on paper. This means finding a broker who offers you the ability to practice trading through a simulated account until you have found your feet. Simulated accounts allow you to run trades just as if they were real and to use all of the supporting predictive, charting and trading software, but without actually placing any money at risk. You will find that many brokers will have a demo account which they will let you cut your teeth on for your first month.
Finally, make sure that your broker has all of the software tools that you need including such things as news feeds, real time quotes, charting and profit and loss calculators and that he has a reliable website which is easy to navigate, fast and has excellent backup facilities.
Many people will tell you that, after the right training, a good broker is key to the key to the success of any novice trader and a broker who will provide you with a Forex demo account and help you to get up to speed is worth his weight in gold.
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