| Right, so you think you're ready. You want to make | | | | you actually have. Typically leverage of 100:1 and 200:1 |
| your first trade. What do you do and how do you do | | | | are provided by different brokers. |
| it? | | | | This can be very useful because it will allow you to |
| Well the first thing is to find the right FOREX broker. | | | | increase your profits. However the risk is also |
| Brokers are institutions who are licensed to make | | | | increased because if the trade goes against you and |
| trades on your behalf with the market. There are lots | | | | uses up the balance of money in your account then |
| of them, so you should look carefully and make sure | | | | you will get a margin call. |
| of the following: | | | | This is where the broker will call you to demand that |
| - They are licensed to trade | | | | you add additional funds to your account to cover |
| - They have a good reputation in the market | | | | your losses. Not nice!! |
| - Their customer service is good | | | | One way to bypass this risk is to chose a broker that |
| - There spreads (costs) are low | | | | will automatically close your position once the funds |
| - They offer a lot of choice | | | | have been exhausted so that you never get that |
| Fortunately there is an enormous amount of | | | | phone call. |
| information on FOREX brokers on the web and it is | | | | It is also worth mentioning that if you have a proper |
| relatively easy to check out individual brokers. Some of | | | | risk management plan then you will never have this |
| the companies I have dealt with include FXCM, | | | | problem. |
| FOREX, FXPRO, FXDD, and FOREXMETA. These | | | | The final term you should be aware of is the LOT. |
| can all be searched for on Google. | | | | The 'lot' is the unit of money that you wish to deal with |
| So How Do You Place A Trade? | | | | when trading forex. One 'lot' is typically worth $100,000 |
| Let's assume you have chosen a broker, and created | | | | and it is possible to deal with fractions of a 'lot'' like 0.1. |
| an account. At this stage it is worth repeating. Please | | | | This allows you to deal with smaller sums at the |
| trade on paper or with a virtual account first so that | | | | beginning. |
| you can get used to all the terms and the way the | | | | The number of lots that you deal with is dependent |
| FOREX markets work. | | | | upon the amount of money that you deposit to start |
| All credible brokers will have a virtual training account | | | | trading. |
| available for you to practice trading with. Please use it. | | | | So let's run through a typical example in a trade. We |
| So everything is set up. | | | | will assume that you are trading the EUR/USD trading |
| When you are ready to trade you will see a list of | | | | pair as mentioned above. You select the pair and get |
| possible FOREX pairs to trade like EUR/USD, GBP | | | | the following quote: |
| USD or USD/CHF and for each pair you will see a pair | | | | BID 1.3540 / 1.3543 ASK |
| of figures quoting the price. Let's take the EUR/USD | | | | After your analysis you decide that the EURO is going |
| as an example: | | | | to get stronger than the USD so you BUY the EURO |
| With this pair you will see figures quoted like: | | | | and SELL the USD. This is done at the same time |
| 1.3428 / 1.3431 | | | | when you make the transaction as it is a PAIR. |
| The first figure is known as the BID price and the | | | | We will also assume you are using 100:1 leverage on |
| second figure as theASK price. As usual currency | | | | your account. |
| traders come up with strange terms for these things, | | | | So you decide to BUY 100,000 euros at the ASK price |
| but essentially: | | | | of 1.3543 so paying $135,430 (100,000 * 1.3543) to do |
| The BID price is the price that you sell a currency at, | | | | so. Your margin is 100:1 or 1% so you actually pay only |
| and the ASK price is the price that you buy the | | | | $1,354 for this trade. |
| currency. | | | | Let's assume that the EURO rises and you are quoted |
| If you look at the example the figures have a slight | | | | a new price of |
| difference of 3 PIPS. A PIP is the fourth decimal point | | | | BID 1.3578 / 1.3581 ASK |
| (the one on the right hand side) of the figure. So | | | | You are now in profit and wish to sell so that you can |
| looking at our example again, the PIP is highlighted | | | | pocket the money. |
| below: | | | | You SELL the euros at the BID price of 1.3578, thus |
| 1.3428 / 1.3431 | | | | pocketing $135,780. Now then, you bought the euros at |
| So as the values change by 1 PIP, you will see an | | | | $135,430 and sold the euros for $135,780. That is a |
| incremental change in the figure on the right hand side | | | | difference of $250 which is your profit. |
| The fourth decimal point is true for almost all | | | | Congratulations!! |
| currencies expect that Japanese Yen which is the 2nd | | | | This article has explained the basics of how you make |
| decimal point on the right hand side. | | | | a trade in FOREX. It is very important to understand |
| The difference between the BID/ASK price is called | | | | these principles before you make a trade. Fortunately |
| the SPREAD. This is the cost of trading that currency | | | | there is a vast wealth of knowledge on the internet |
| pair. | | | | that you can browse. |
| The SPREAD will vary between brokers and also at | | | | Trading in FOREX is easy wants you understand the |
| certain times of the day and week. For example if | | | | principles. If you want to make it even easier then you |
| there is a major economic news announcement due | | | | can trade FOREX automatically using robots. |
| the SPREAD will be increased, and they are also | | | | See below for a system that in just the last 2 days |
| generally increased during the holiday seasons. | | | | increased my pot of money by 7.7% and its growing |
| The next term to learn is LEVERAGE. This allows you | | | | fast. |
| to control a much larger trade than the money that | | | | |