A Beginners Guide to the Forex Markets

A Beginners Guide to the Forex Markets

A Beginners Guide to the Forex Markets

The forex market is the world's largest financial market and can often be traded from anywhere in the world, 24 hours a day, 5 days a week. Provided they have a trading platform, retail investors can access the market using a personal computer and fast internet connection. Forex brokers normally provide their forex platforms for free.

Trading the forex market can be risky, partly because it is normally leveraged. Leverage means that profits can be multiplied many times over, though the same is true of losses. Put another way, with margined forex trading, as with spread betting and CFDs, trades are leveraged which means that you can lose more than the capital that you originally committed.

Forex trading entails the simultaneous buying of one currency and the selling of another. The most commonly traded currency pairs are the EUR/USD, USD/JPY, GBP/EUR and GBP/USD.

If you are a newcomer to forex trading, it's advisable to learn about how the markets operate before you trade with real money. As with all trading, only invest using money that you can afford to lose. It's generally a good idea to try out your own trading strategies using a forex trading demo account. This will enable you to place dummy trades in real time, but without risking any actual money.

Opening an Forex Trading Account

If you decide to get into forex trading for real, you can open an account with one of a range of UK based trading companies. Accounts can differ in what they offer traders, so you are advised to spend a little time choosing a suitable provider. You can also trade the forex markets and a range of other markets with CFD brokers and spread betting companies.

Some of the common features of financial spread betting accounts are risk management tools, including stop loss orders, 24 hour trading access, charting packages, access to forex news sources, forex research and analysis tools.

Following Forex Trends

Currency pair prices fluctuate over time. A key way to follow forex price movements is through charts. This type of analysis is key to technical analysis. Looking at the trend of a currency pair over a period of time will assist with your analysis of where you think it is going in the future. If the currency pair has been consistently rising, for example, you may consider it a good time to buy. Conversely, a falling trend may indicate a good time to sell.

Despite the importance of understanding trends, they are not, in themselves, guaranteed. Markets often turn instantly and without warning. The main problem with technical analysis is that historical performance does not guarantee future performance. Just because a market has moved a certain way for the last three months that does not mean it will continue to do so.

Forex, CFDs and spread bets do carry high levels of risk to your funds. When trading always make sure you recognise the risk involved. Trading may not always be suited to all classes of investor; where necessary obtain impartial guidance.

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