Since the breakdown of the Brettonwoods currency system, most states have adopted the floating exchange rate system. Hence now folk have got a chance to trade currencies based mostly on the fluctuation in the exchange rate. One need not have any prior experience at trading Foreign exchange. All one needs to have is an account with a broker, and a checking account with a bank.
One ought to know certain basic points about the forex market before starting to trade. Currency is always traded in pairs. You can trade in any pair of currency, like USD-EUR or USD-GBP or USD-CHK for example. The fluctuation of currencies is measured by a unit called pip. Per transaction, you can gain at most 1.5 pips, which is equivalent to $15. Therefore if you make 5 such transactions, then you can make $90 in one day, without moving a muscle! This money is immediately credited into your current account, as foreign exchange transactions are done on mark-to-market margin, which means that at the end of the day, if your lots book a profit, then it is credited the same day in your current account and if you make a loss, then the loss is debited that day as well.
One can trade currencies in spreads. If the trader sees the market is bullish, i.e. The market is on the rise, then she or he can buy derivatives contracts like call options and put options and make a bull spread. If the market is bearish, i.e. On the downswing, then one can make a bear spread using call and put options too. So , in this example, one will limit their losses as well as profits. Most blogs on foreign exchange suggest newbies to do it.
Forex, like commodities, is purchased/sold in lot sizes. Those for beginners ? accounts are around 100,000 cents (EU Buck or USD). For real accounts, for professional traders, it adds up to 100,000 USD or Euro Bucks. Most beginners ? accounts have limitations like only 300 open contracts are accessible and the margin percentage is 1%. The stop out percentage is 20% and the quantity of contracts that one can own at the crossroads in time ranges between 0.1 and 100. The margin call level is 50% and the interest involved is 0%. You can start a beginners ? account with a deposit of only $10 and this deposit can be made using online transaction software. Even before opening this account, you could open a demo system, where you might practice trading. It is a lot like paper trading.
Most people, who are pro traders, use a beginner?s module when they'd like to try out a new strategy. All of these modules are compatible with Meta Trader 4 and Meta Trader 5. These are software that you can use to analyse the forex market, and decide your position. This software has compatibility with Computers and different kinds of operating systems.
Be very careful before you actually start trading. Look at the market well before executing a contract, or else you might lose big money.
This manuscript has been created by Peter Watson. He's an expert at writing about Foreign exchange and other fiscal articles. You could check out his posts at this useful page or you could contact us for full information.
Source: http://freefinancearticles.info/how-can-i-analyse-the-foreign-exchange-market
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