Learning How Currency Trading Works

Trading currencies on the Forex market is something that is available to individual traders everywhere. As long as you have a reliable high speed Internet connection and some starting seed money for trading you have the ability to pick out a broker, open an account, and start trading. However, there is no market that is trickier or more volatile than the Forex and that’s why new traders should take some serious time to study how trading currencies work and to use practice accounts to get the hang of things before putting your own money up for risk.

Leverage: Friend & Foe
Leverage is a major part of how currency trading works. Generally the minimum trade is $1,000, which will normally control $100,000 in currency. This is how major money can be made (or lost) when the value between a couple currencies moves even a fraction of a cent (or pips). Looking at 0.0002 might not seem like much, at least not until you take that times 100,000.

Leverage means a small amount of money put in can reap massive profits when the trade breaks your way, but it also means that you can lose a lot of your initial investment in a very short time if the market goes volatile and suddenly turns against you.

Trailing Stops
Trailing stops are your best friend when trading the Forex. This means as your currency pair is moving, when it goes down a certain number of pips, the stop automatically kicks in and kicks you out of the trade. This is critical to make sure that you protect yourself from potential losses while still staying in long enough to cash in on some winning trades.

All smart traders use trailing stops. This is a huge part of how successful currency trading works.

Learn Currency Trading: So Much To Learn

When it comes to currency trading there is a lot to learn. The Forex market is the most complex trading market in the entire world as well as the most volatile. There are many different strategies to trading, and many different ways to make money doing so.

All trading is done in currency pairs. One currency is used to buy another, and the hope is that the difference in changing values between the two creates a bigger gap – allowing the trader to profit. Leverage is also a major part of trading currencies on the foreign exchange (Forex) markets.

Generally speaking $1 controls $100 in the forex so the conventional $1,000 bet size actually controls $100k of currency. This is how such small and frequent volatile movements in the market can result in so much profit – because it is scaled up times 100. The numbers can be a little bit higher or lower, but $100 is a pretty common base.

One of the first things you will need is a trading account with an online broker. Look for a broker online and use the software they provide. Every one of these should come with practice software that uses play money but real life charts. This is crucial in order to get used to how the charts work, how fast the markets move, and to learn how to handle all the action going on so you can profit instead of getting confused which is a recipe for disaster.

Keep in mind that currency markets move by the second, meaning you really need to keep on top of them and learn how to read patterns to have any chance at all of becoming a successful trader. If you do this, you will have a chance make money trading currency.