Trading currencies brings with it not only the potential of making profits and losses, but also its own set of fallacies. Currency trading (Forex) used to be reserved for professionals – commonly banks and other financial institutions. Large amounts of money changed hands, and many people mistakenly believe that this is still the case.
With the advent of the Internet and the home computer, many ordinary people are now availing themselves to the benefits of currency trading. The market has evolved to accommodate the average person and large amounts of money are no longer needed. Anyone can now open a Forex mini account – these include:
Low minimum account
This type of account is designed for traders on a low budget. If you can afford $300, then you can begin trading. It is handy for beginners because it has a low risk factor – especially if the beginner is still struggling with basic concepts of Forex trading. This amount can even be viewed as their start up capital.
High leverage account
Leverage is basically a loan provided by the broker. You would first need to open a margin account with the broker – who then decides on the leverage amount. Your start-up capital may only need to be $50. With for example, the leveraging power of 200:1, you may be able to :PROTECTSTART2:39632dfe44a4616be1669398007501cb:PROTECTEND2: very large profits. Be aware that this can also work against you – leveraging will significantly amplify potential profits but conversely, it can also amplify potential losses.
Although leveraging can be risky, the risk is reduced when you remember that currency prices change by only a very small amount within any one particular day.
In any case you can accrue substantial profits with only minimal start-up costs using a high leverage account – providing you use sound risk management techniques, as well as the use of stop and limit orders.
Trading in PIPS
This method not only enables you to l:PROTECTSTART2:39632dfe44a4616be1669398007501cb:PROTECTEND2: Forex trading easily, but also enables you to minimize risks – thereby reducing pressure. This method does require that you follow the proper Forex signals and also that you exercise some self-discipline. The advantage here is that you do not lose everything should there be a market downturn.
Beginners are advised to undertake as much learning as they can before embarking on a Forex account. Combine your learning with some “hands-on” practice on a free Forex demo account (no money involved) – this will help settle the information overload, and your learning will make much more sense. Do not make the mistake of forever taking on new information without ever taking action.
Make sure that you learn how to interpret trading patterns, signals and charts correctly. The most successful Forex traders use these skills to enable them to predict movements in world currencies. Learn to keep abreast of major events such as war and earthquakes – these will have an impact on currencies. These skills are not learned overnight, but will be acquired gradually over a period of time.