Forex 101
The foreign exchange market, called the Forex or FX market, is the largest financial market in the world. Its trading volume is now over $3.0 trillion a day and compared to others such as the NYSE with a daily volume of $30 billion, it has no rival.
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Also, unlike the NYSE, NASDAQ or other markets, the Forex market literally trades 24 hours a day and is one of the most liquid markets tradable, meaning you can get in out of the market at any time.
Banks, other financial institutions, hedge funds, all use the Forex market. But they are not the only ones that have access to it. You too can access this market.
Now you may be thinking you will need a large amount of money to get into this market. Not true. You can start an account with as little as $200, depending on the broker you choose to open an account with.
Trading in the Forex market can give you the opportunity to earn a lot of money. However, you also need the proper knowledge, tools, and discipline as this market does have risk, just as you have risk trading stocks, bonds, or futures. The fact is that many people who trade this market do lose money and sometimes quite a lot of money.
This is why it is very important for you, as a beginner trader in the Forex market, to have the proper knowledge and education on how to trade in the Forex market. There are literally hundreds of websites and blogs that contain quite a bit of information (much of it free) on trading the Forex market.
In addition, most (if not all) Forex brokers offer free practice accounts to help you learn how the Forex trades and to practice your trading skills and strategies with live data, but not risking real money. Most will offer you a demo account with a simulated $50,000 to $100,000.
Once you feel comfortable with using the trading platform offered by your broker, and you are ready to try live trading, you will need to fund an account. Again, most brokers allow you to open an account with as little as $200, which allow you to trade what is known as a "mini" account. Mini accounts are set up for traders with limited capital. This also allows a trader risk much less capital, because you will be trading a mini lot, which is valued at 1 'pip? or about $1.00 per lot.
Use these mini lots to start trading with live data and real money. These are great because it allows you to get into the real-world trading environment and test not only your trading strategies, but your personality and your fortitude.
Trading in an environment where you can't lose money (demo accounts) versus the real-world environment where you can lose money does have its differences and they are mainly in your own mind.
The psychology of trading is one of the main reasons many traders fail. Greed and fear are the two main killers in trading. These two traits can be overcome, but it does take time. That is why spending time trading the demo account and only trading the smaller mini lots when you go live is vital to your success. Using these two ideas can help you become a much better trader!
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