An Introduction to Forex Trading New

If you are interested in trading on the Foreign Currency Exchange

(FOREX) market, then you have probably heard the stories of people who become millionaires while working from their homes.  These stories are not exaggerations – there really is millions to be earned with Forex trading.  But the truth is that 70% of Forex traders are going to lose money.  If you want to put yourself up with the top 30% who are making it big, then you will have to do a lot of research to make sure you know what you are doing.
The Forex market is larger than any other trading market worldwide with nearly $2 trillion being turned over every day.  To put this amount in perspective, it is about 30x more than all of the equity trading in the US.
Forex trading involves the trading of a pair of currencies which are bought and sold against each other.  One example of a Forex trading currency pair is USDEUR, which refers to US dollars and Euros.  All of the major world currencies are traded on the Forex market with the most popular trades occurring in US dollars, Euros, Swiss francs, British pounds, Australian dollars, and Japanese yen.  In a currency pair, the first currency is called the base and the second is the counter, also called the quote.  The quote is always given in terms of the base currency.  Quotes consist of two prices.  The first is the bidding (selling) price and the second is the asking (buying) price.
Currency quotes are frequently changing.  These changes in the rates are known as pips.  A trader’s command of predicting pips is key to making money on with Forex trading. What is unique about the Forex market is that traders can react to any market fluctuations 24 hours a day, every day with the exception of weekends. This means that an attuned Forex trader can take advantage of an opportunity if he/she finds out market news (like a political event), even if it is the middle of the night.
When you invest in a trade, you trade at a certain margin requirement but also have a stop-loss order.  The stop-loss order is to protect you against too much loss.  If your currency pair goes below a certain amount of pips, then you remove your assets.  You also can have a limit order amount for when you are profiting. With the right risk/reward amount, you can make it so you will be more likely to profit even if your predictions are wrong most of the time.
Forex trading is not like stocks because Forex traders are high leverage, usually in the 100s.  For example, if you invest $2,000, you could control $200,000 and have increasing profits accordingly.  There are some miniature Forex trading markets where you only need to have investments equaling $100.  This makes Forex trading more accessible to all people.

How to Manage Risk in Forex Trades

The foreign currency exchange market is in constant flux. 

There are so many various factors which change the value of a currency – social aspects, economy, politics, environmental catastrophes, etc – that it is impossible to track them all.  However, you will have to have a strong general understanding of each of the powers in play if you want to be a successful Forex trader.
Before you begin with Forex trading, you must spend time analyzing the trends affecting currencies.  There are numerous books, online tutorials, video classes and seminars you can use to learn about Forex trends.  Even with months of analysis, you are still unlikely to be an expert.  For the many people who are eager to start Forex trading, this lack of proper knowledge can be a major pitfall – and the reason that 70% of traders will lose money while the other 30% gain large amounts.  Some of the risk management lessons in Forex trading can only occur through experience, so it is wise to use a quality Forex broker to cut back on the risk.
You will need a Forex broker in order to start Forex trading. There are a huge number of Forex brokers available on the internet – and there is a huge difference between them.  Some of the Forex brokers operate under no regulation whereas others follow strict regulatory guidelines which are designed to reduce risk.  For traders in the United States, the CFTF and NFA give information about specific Forex traders and their histories. With a quality Forex trader, you should get access to free advice, systems, or educational materials. Look for the Forex traders which offer real-time charts and pivots.

Aside from knowledge and assistance, Forex risk management also depends on keeping a sound risk profile.  As a trader, you should have set up a risk profile in advance where you decide the exact percent of the account amount you are willing to risk.  You must also determine an exact stop-loss order as well as a limit to exit order. For example, if you are dealing in the currency pair EUR/USD at the price of 1.0190, you could set your stop-loss order at 1.0150.
For traders, one of the major advantages of Forex trading is that it has such a high leverage, often going up to 1:200.  While this amount of leverage is attractive because it can greatly magnify your profits, never forget it can also magnify your losses too.  Take some time to do the math before you enter into any trade.  Calculate how much you would gain or lose on your investment at the specific leverage and your stop-loss order and limit to exit order.   Always remember that all trading – including Forex – is inherently risky.  But you can cut back on this risk by following sound habits like doing research, using a regulated broker, and seeing limits in advance.