Gettting Started In The World of FOREX Trading

You may have heard about the foreign exchange market, or FOREX as it's usually called and the investment advantages it offers. You want to try it out, but you're not sure where to start. This brief guide will give you the basics in the FOREX market trading and tell you what you need and what to do to participate in this fast growing market.

Foreign exchange trading once was limited to large players such as national banks and multi-national corporations. During the 1980's the Forex exhange rules were revised to allow small investors to join in the fray using margin accounts. Margin accounts are the primary reason why FOREX trading has become so widespread. With a 100 to1 margin account, you can control a $100,000 contract with a $1,000 investment.

FOREX trading is not simple, however, and an education in the Forex marketplace is needed to make wise investment and trading decisions. Although it is fairly easy to start trading on the FOREX, there are some risks involved, so finding out as much as possible about the market is wise for any beginner.

FOREX traders most often require a broker to handle their transactions. Most brokers are very reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

To open a FOREX account is simply filling out a form and providing the necessary identification. The form will contain a margin agreement that states that the broker can stop any trade it deems to be too risky. This is to protect the interests of the broker because most trades, after all, are done using the broker's money. As soon as your account has been opened, you can fund it and begin trading.

Most brokers have different types of accounts to suit the needs of individuals investing needs. Mini accounts allow you to get involved in FOREX trading for as little as $250, while standard accounts may have a minimum deposit of $1000 to $2500 depending on the broker. The amount of leverage, or borrowing the broker's money, varies with accounts. Higher leverage provides you with more money to trade for a given investment.

HOWEVER, beginners are advised get acquainted with FOREX by doing paper trades for a period of time. Paper trades are practice transactions that don't require real money. Those trades allow you to see how the system works while learning how to use the various software tools that are at provided by most FOREX brokers.

Many e-brokers have demo accounts that allow you to make paper trades for up to 30 days or more. Every new FOREX trader is strongly advised to stick with these demo accounts until they are showing consistent, steady profits.

Every broker has their own set of software tools to help you make transactions, but there are some tools that are common to all FOREX brokers. Real time quotes, news feeds, technical analyses and charts, and profit and loss analyses are some of the features you should expect to see on every online brokers web site.

Every large broker operates on the Internet. To access their online services you should have a reasonably modern computer, a fast Internet connection, and a recent operating system such as Windows XP. Once your account is set up, you can access it from any computer, just enter your account name and password. If for some reason you are not able get to a computer, most brokers will allow you to make trades over the phone.

Trades are commission free, meaning that you can make many trades in one day without worrying about high brokerage costs. Brokers make their money on the 'spread', which is the difference between the bid and the ask prices.