If you want to get started in the Forex trading market, you will need the following: a high-speed Internet connection, a trading system, and a funded Forex account.
In comparison, the equities market and Foreign Exchange Market (Forex), (FX), have quite a few similarities, but they also differ in very distinguishable ways. Here you will learn those distinguishable differences and thus be able to begin trading the forex market.
But first lets learn a little more about the subject of forex trading. Firstly if for any reason you are unfamiliar with the term, Forex “FOReign EXchange market”, which refers to an international exchange market where currencies are bought and sold. Next, of all, forex is a unique market for a number of reasons. First it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated.
Another rather exclusive attribute of the Forex cash market is the variance of its participants. Investors find several causes for going into the forex market, some as longer period hedge investors, while other ones utilize massive credit lines to seek large short term gains. Intriguingly enough unlike the blue-chip stocks, which are generally more appealing to the long period shareholder, the blend of rather unchanging but minute daily fluctuations in currency prices, conceive a natural environment which attracts investors with a very broad variety of strategies.
The Forex market spans from one zone to another in all major financial centers on a 24- hour basis since it has no physical exchange. Since there is no centralized exchange for currencies to be sold or bought, forex is considered to be an over- the counter market or what is called OTC. Banks and forex dealers are connected around the world via internet, fax and telephone to form the Forex market. Second, Forex is a large trading volume with a daily average of $2.0 trillion in April 2004 (source: BIS study Triennial Central Bank Survey 2004). Third, Forex is open 24 hours worldwide with major trading centers in London, New York, and Tokyo and made traders access the market any time and act on global developments. Lastly, Forex has lower transaction cost. 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.
It is very important when trading in the forex market that you Choose a Broker, and that you do your due diligence before choosing. There are many forex brokers to choose from, just as in any other market.
Now that you are ready to begin forex trading, and are ready to open and account, keep in mind that when you sign up for a forex account it is strikingly similar to signing up for and getting an equity account. There is one major difference however, and that is that, for forex accounts, you are required to sign a margin agreement. This agreement states that you are trading with borrowed money, and, as such, the brokerage has the right to interfere with your trades to protect its interests. Once you sign up, simply fund your account, and you’ll be ready to trade!