How to Start Trading in the Forex Market

By Barry Solomon , last updated June 10, 2011

The Forex, or Foreign Exchange market, is a world currency trading market where you can use one currency to buy another. This is called a currency pair. You are going long on the currency that you are holding and short on the one that you are selling to get it. This is an arena that, years ago, was pretty much limited to big banks and other financial institutions. But now, with the development of online technology, it has become democratized and is available to even the small trader.

The Forex trading market offers investors 24 hour access to trades, high leverage (you only have to come up with 0.25% of the value of your trade on margin), commission free trading, and easy accessibility through the various electronic trading platforms that are available to investors. The "bet" that you are placing is that the currency you are buying will go up in value compared to the currency that you are selling. And because you can be so highly leveraged, you can control a great deal of money with very little.

Unlike stocks, currency trading is completely transparent. You are working with the monetary systems of countries. Stocks are held by corporations which are much less transparent. With sufficient research and looking at historical performance, you will get better and better at predicting currency fluctuations. In fact there are broker sites that allow you to go on and make fictitious trades to improve your diagnostic skills. Keep in mind though that political and military exigencies as well as natural disasters such as earth quakes and Tsunami's can turn a situation upside down. So it is important to be prudent in the amount of money that you commit to real trades. Learn from your mistakes and first visit some of the web sites available that will allow you to execute practice trades with no risk.

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