What do I need in order to start trading Forex?

What do I need in order to start trading Forex?

As opposed to other markets, you really do not need much to trade Forex. No license is required, and you can trade Forex with a very small initial capital. However, it is not recommended to jump into Forex trading without massive preparation before. 

This should include reading, studying, and familiarizing yourself with the ins and outs of the market as well as choosing a top reliable broker with whom you can trade.

Top Five Forex Mistakes

Are you a Forex trader or would like to become one? You should go over this article to learn more about common Forex mistakes you need to avoid at all costs.

Do not start trading until you have a perfect understanding of the market. Learning about Forex can take months, and it is in your best interest to focus on your education and practice before you invest real money on the Forex platform. You will lose your initial investment if you are not knowledgeable enough to recognize good opportunities. Be patient and consider your education as an investment.

Do not use the first Forex broker you find. There are plenty of unreliable brokers that will not treat you fairly or charge you ridiculous rates. You should also compare leverage rates to make sure you are getting a fair deal if you want to borrow money from your broker. Take the time to do more research on different brokers to find out which services can be trusted and which ones should be avoided. Talk with other traders if you need recommendations.

If you are a beginner, do not try analyzing the market yourself. You will get better results if you follow tips and use analyses developed by professionals. Familiarize yourself with the technical method and the fundamental analysis, and specialize yourself in the one you understand best. You could, of course, use both methods if you have a good grasp of both approaches. You should read blogs, subscribe to RSS feeds or email alerts from professional traders who share their tips and analyses until your own analyses match what professionals are predicting.

Mistakes That Forex Traders Make

When getting started in Forex trading, there are common mistakes to be avoided. This is a list of common forex trading mistakes.

1. Using Too Much Leverage:

One of the biggest advantages of Forex trading is the ability to use leverage or trading on margin. One of the most common mistakes that Forex traders make is using too much leverage. Using too much leverage is when you have a small account balance, but make a big trade. If the market moves against your position by just a small amount, it can result in large losses. Commonly, the beginning Forex trader will get emotional and nervous and close the trade for a sizable loss.

2. Over Trading:

Over Trading occurs when traders try to look for trading opportunities that are not really there. It happens to new traders very often, because they just want to trade. The result is usually a poorly executed trade that results in an eventual loss. Over trading can also result in traders making too many trades at once and using too much margin.

Spot Market and the Forwards and Futures Markets

There are actually three ways that institutions, corporations and individuals trade Forex: the spot market, the forwards market and the futures market. The Forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on. In the past, the futures market was the most popular venue for traders because it was available to individual investors for a longer period of time. However, with the advent of electronic trading, the spot market has witnessed a huge surge in activity and now surpasses the futures market as the preferred trading market for individual investors and speculators. When people refer to the Forex market, they usually are referring to the spot market. The forwards and futures markets tend to be more popular with companies that need to hedge their foreign exchange risks out to a specific date in the future. 

Introduction to Forex

The purpose of this ebook is to introduce the forex market to you. As with many markets there are many derivative of the central market such as futures, options and forwards. In this book we will only be discussing the main market sometime referred to as the Spot or Cash market.

The word FOREX is derived from the words Foreign Exchange and is the largest financial market in the world. Unlike many markets the FX market is open 24 hours per day and has an estimated $1.2 Trillion in turnover every day. This tremendous turnover is more than the combined turnover of the main worlds' stock markets on any given day. This tends to lead to a very liquid market and thus a desirable market to trade.

Unlike many other securities (any financial instrument that can be traded) the FX market does not have a fixed exchange. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals.

Trades are executed through phone and increasingly through the Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily within the reach of most investors.

How To Become A Successful Forex Trader

Are you thinking about becoming a Forex trader? You should go over this article to learn more about Forex and how to become a successful trader.

Becoming a successful trader could take you years. You should start by educating yourself about Forex and trading in general, practice with small investments and learn from your mistakes. It might take years before you can earn a good living thanks to your work as a trader. Do not approach Forex with unrealistic expectations and keep in mind that you will eventually be successful if you are patient and ready to persevere. Forex is becoming more popular and a large number of people try becoming traders but remember that only a small percentage invests enough time and efforts to become a professional.

Explore the two main Forex analysis systems. Some traders rely on fundamental analysis, which is based on observing the economical and political situations of a country to deduct currency fluctuations. Technical analysis is based on mathematical formulas that allow traders to recognize patterns and make predictions based on previous occurrences. Both methods have their pros and cons but you should focus on the one you are the most comfortable with.

What is Drawdown

Draw down is the difference between the balance of your account, and net balance of your account. The net balance takes into account open trades that are currency in profit, or currently in loss.

If you account net balance is lower than your account balance, this is called drawdown.