What are the basic things you need to know when dealing with foreign currency trading?


Quick Answer

Basic things to know when dealing with foreign currency trading are that it involves a great deal of risk, currencies are traded in pairs, and trading is available 24 hours a day, according to XE. The foreign exchange market, or Forex, has a high volume of trades, which translates to low trading prices. Entering the Forex market is possible with minimal startup capital, since many firms do not charge commission and allow trading on leverage.

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Full Answer

Currencies can fluctuate dramatically and quickly, so investors should only invest risk capital, asserts XE.

New Forex traders can get the hang of the process by using one of the trial versions of online trading platforms, asserts Oanda. After developing an understanding of how world events and market shifts impact currency, the trader should make a solid trading plan. To minimize risk, the plan should include stop-loss and take-profit instructions for every market order. New traders should not go into a Forex trade with the expectation of getting rich overnight; sustainable Forex success comes slowly.

Traders should be wary of leverage margins, states TD Ameritrade. Although large margins enable traders to control large sums of money with a small investment, they can also result in big losses.

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