5 Things You Need to Know Before you Begin Forex Currency Trading

Many people have heard of Forex currency trading as a way to make fast money online

. Currency trading can be very lucrative; however, there is a very steep learning curve.

Forex is short for foreign exchange and is considered the largest financial market in the world. It is a trillion dollar industry that revolves around the buying and selling of currency pairs. Basically, the value of one country's currency in relations to another country's currency.

Here are five things you must know about Forex trading before making your first real trade.

1. You are a small fish in a very large pond.

The Forex market is completely dominated by the world's largest banks and financial institutions. While your trading account may have $100,000, banks are trading trillions of dollars. Their trades can have a significant impact on your trades. Always be careful when trading and avoid making late night trades as the banks are generally making there large moves at night.

2. Understanding Currency Pairs

The Forex market is all about currency pairs. The first currency listed in the pair is evaluated and measured against the second currency. The most popular currency pair is EUR/USD, while the other major pairs are GBP/USD, AUD/USD, USD/JPY and USD/CHF.

3. Leverage

The amount of leverage allowed in the Forex market is very unique. You can have a leverage as high as a 400:1. This allows all Forex traders the ability to control more money with a smaller investment. With leverage you can make a large amount of money; however, you can also lose a very large amount of money.

4. Technical and Fundamental Analysis

As with any type of trading, you must develop a system of approach. Successful trading involves learning both technical and fundamental analysis. Learning both of these types of analysis should not be avoided because going into the Forex market without proper training is dangerous due to how quickly it moves.

5. Risk

Forex trading is very risky. There is can be extreme volatility that can completely empty your Forex trading account. Many new traders are intrigued by the possible gains and fail to completely realized the potential losses. Oftentimes, new Forex traders will not use leverage appropriately and lose their entire investment with one trade.

It is imperative to learn as much about Forex trading prior to investing any real money. Most Forex trading platforms offer demo accounts that allow you the ability to learn how everything works.

5 Things You Need to Know Before you Begin Forex Currency Trading

By: John M Thompson

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