A Forex How-to
Forex refers to the foreign exchange market. In the forex market different currencies are bought and sold just like stocks are in the stock exchange. Unlike the stock market that is only open weekdays 9:30 a.m. to 4:00 p.m. EST, forex allows you to trade round the clock from Sunday afternoon to Friday afternoon. Forex isn’t a traditional investment with the expectation of potential return, it is a hedge against inflation caused by currency fluctuations.
Forex investors typically choose one of two research methods to base their investment decisions on: technical analysis or fundamental analysis. Technical analysis includes looking back at the numbers, patterns and trends a currency has exhibited and assessing whether its current price has considered any fluctuations in the forex market. Fundamental analysis includes studying the fundamentals of a country which could affect its currency. These fundamentals could include a country’s political climate, inflation and economic concerns.
Using a Broker
When you have decided you want to invest in forex, you’ve got to find a broker. A reputable forex broker is registered with the National Futures Association (NFA) and the U.S. Commodity Futures Trading Association. A good place to start looking for a broker is the NFA website. Consider just how much the broker charges for commission, the minimum or maximum initial deposit you are eligible to make and the ease with which you can deposit or withdraw your money.
Define your own goals as a forex investor. It is imperative, as it is with all investments, that you have adequate savings for unexpected circumstances in the market. Determine if you want to place the bulk of your funds in a certain continent. See whether you are starting out small, or using all of your savings. Set the level of diversification you require. These problems need to be reflected in your investment plan to assess the risk involved with your potential investment choices. By planning for risk to the best of your ability, you’ll be better able to weather fluctuations in the forex market and make more in the long run.
Before you begin trading the real thing, practice fx trading in a demo account. In a forex demo account you develop trading strategies risk-free with practice money. Once you improve and feel much more comfortable trading forex in a practice account, then put your knowledge to use in the real fx market.
If you’re new to forex, it is best recommended to use a managed account. In a managed account, you let a professional and experienced trader or investor manage your account for you. But you must be careful in choosing managed accounts, as it is most likely prone to scams or fraud. Tip: Make sure you only invest with the reputable ones.
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