The following are required if you want to get started in the Forex trading market: a high-speed Internet connection, a trading system, and a funded Forex account.
Although the equities market and the Foreign Exchange Market (Forex), (FX), have some similarities, they differ in other, very distinguishable ways. Here you will learn those differences so that you can begin trading in the forex market.
Let’s learn more about forex trading before getting started. If you’re unfamiliar with the term, forex is short for “foreign exchange market,” which refers to an international market where currencies are bought and sold. Additionally, the forex market is unique for a number of reasons. Most notably, it is free of external controls and manipulation.
The Forex cash market has another exclusive attribute: the diversity of its participants. Some investors go into the Forex market for longer-term hedges, while others use large credit lines to seek large short-term gains. Unlike blue-chip stocks, which are generally more appealing to long-term shareholders, the combination of rather unchanging but small daily fluctuations in currency prices creates a natural environment that attracts investors with a variety of different strategies.
The Forex market is open 24 hours a day, since there is no physical exchange. Currencies are bought and sold without a centralized exchange, making forex an over-the-counter (OTC) market. Banks and forex dealers are connected worldwide via the internet, fax, and telephone. Second, Forex has a large trading volume—the daily average was $2.0 trillion in April 2004 (source: BIS study).
Third, the Forex market is open 24 hours worldwide with major trading centers in London, New York, and Tokyo. This gives traders the ability to access the market at any time and act on global developments. Lastly, Forex has lower transaction costs. Traders only pay a spread and a broker’s commission ranging from $20-$120 depending on the volume of the trade. It also allows traders to deal directly with the market maker paying only the spread and the price at which a market maker will buy from a customer.
When trading in the forex market, it is essential to choose a broker and do your research before making a selection. There are many forex brokers to pick from—just like any other market.
When you’re ready to start forex trading and open an account, remember that signing up for a forex account is quite similar to signing up and getting an equity account. The main difference is that, for forex accounts, you have to sign a margin agreement. This agreement means that you’re trading with borrowed money and, because of this, the brokerage has the right to interfere with your trades to protect its interests. After you sign up, just fund your account, and you’ll be all set to trade!