Investment Currency

5 Things You Must Know About Trading Online Currency

Introduction

Trading online currency could be a fruitful initiative for people that have the patience to learn what Forex is about. The majority of beginners would start by placing orders randomly, but they will end up with an empty account sooner or later.

Step 1

As a smart trader, you will need to study all the secrets of trading online currency, and to use the free platforms put at your disposal by different companies to simulate trading. Only after mastering all the trading online currency methods, you can start using your own real money to trade.

Step 2

Forex is the abbreviation of Foreign Exchange Market, and it is the largest international market in terms of traded volumes. A characteristic of trading online currency is the fact that it has no physical location, unlike the common stock trading markets that have their own headquarters. This is a huge advantage of the trading online currency market, as it saves a lot of money.

Step 3

The trading online currency market is characterized by a few major banks, governments and companies that are setting the trends. Those companies are only 5 % of the market in terms of traders, but they have control over 60 % of transactions. In other words, when a government uses the trading online currency market, it will exchange large volumes. The rest 95 % of traders are speculators, and the transactions initiated by those traders, meaning 40 % of the total volume on the trading online currency market are made for obtaining profit.

Step 4

The first step for an individual to start trading online currency is to open an account with one of the different sites offering those services. Choose your broker carefully. Each one of them has its advantages and disadvantages, and it is important to understand the terms and conditions of your collaboration with the trader.

Step 5

Some brokers have small commissions for signing up, but they will request higher commissions for individual transactions. Check the withdrawal conditions also, to see what taxes are charged by the broker in case you want to withdraw the money.

Tips

You must understand the term of currency pairs before involving in the trading online currency market. A pair always has two quotations, “ask price” and “bid price”. The difference between those prices is the spread, and it is usually the commission of the broker. As the broker makes serious money from this difference, you should find a broker that does not charge any other commission besides the spread.

Sources and Citations

Another important concept on the Forex market is the leverage. This method is used by the majority of traders on the trading online currency market. With the help of leverage, you will have the possibility to control large lots of pairs. While this method could be profitable, and in the majority of times it is, it is also risky, as sometimes you can lose more money than your total bankroll. this is where the difference between a good trader and a bad one is made, and you should understand the market first if you want to have a successful trading career.

By Vlad Dake, published at 03/29/2012
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