Forex Trading the Foreign Exchange FX Currency Markets

The Margin Advantages of Trading FOREX.

There is one aspect that is considered as one of the best advantages
of FOREX Trading. This is related to the amount of money you need to place a trade, this is known as "margin", and in short, this is all that can be lost in a the case you had a bad trade.

I state it like this because, even though I know with
proper self-taught education you're NOT going to lose as
much as you win anyway, I want you to know that despite the
super-high leverage associated with FOREX trading (200:1 is
possible; meaning that if you put up $1 the trading vendor will
allow you to trade like you really have $200), it's still
arguably less risky than futures (commodities) trading. And, forget stocks, you'll never get this type of LEVERAGE
in the equities market.

Futures markets are often prone to sudden and dramatic
moves, against which you can not protect yourself, even by
trading with protective stops. Your position may be
liquidated at a loss, and you’ll be liable for any resulting
deficit in the account. But because of the FX markets deep
liquidity and 24-hour, continuous trading, dangerous trading
gaps and limit moves are eliminated. Orders are executed
quickly, without slippage or partial fills. And finally,
there are no margin calls -- for your protection, ALL our
recommended brokers will automatically close out some or
all of your open positions if your account equity falls
below the level required to hold the positions. Think of
this as a final, automatic stop, always working on your
behalf to prevent a debit balance. In fact, if you pick from
our list of recommended brokers, we guarantee that you will
never lose more than you have in your FOREX account.

http://www.1-forex.com

About the Author

FOREX Trader and Freelance writer.

http://www.1-forex.com

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FOREX currencies are traded in much smaller divisions than cash. Whereas the smallest division in US cash is the penny ($0.01), US currency can be traded on the FOREX in divisions of $0.0001. This smallest division is called the pip (short for Price Interest Point - sometimes just called 'points'). Since currencies are traded in large lots of (say) $100,000 - small movements in value can generate substantial profits and losses. In a lot of US$100,000 one pip is worth $10 so an increase in 40 pips (4/10 of one cent) can generate a profit or loss of $400.

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Most FOREX traders use a broker to handle their transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells orders according the investor's decisions. Brokers earn money by charging a commission or a fee for their services.

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To be a successful FOREX trader you need a trading strategy. There is no one set strategy that is good for all traders; rather, each trader needs to develop his or her individual approach to the FOREX. Some traders rely solely on technical analysis while others prefer fundamental analysis, but many successful FOREX traders use a combination of both to get a broad overview of the market and for plotting entry and exit points.

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Knowledge is the key to successful FOREX trading. The knowledgeable trader has greater awareness of how the market moves and more chances of making profitable transactions. Without knowledge you are shooting in the dark. You may succeed on a few deals but the odds are that you are going to lose in the long run.

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Despite the claims you may see on some FOREX web sites, FOREX is not risk-free. You are trading with substantial sums of money and there is always a possibility that trades will go against you. There are several trading tools, however, that can minimize your risk, and with caution, and above all education, the FOREX trader can learn how to trade profitably and while minimizing losses.

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