CurrencyTradingABC.com

To begin trading in foreign currencies, you must choose a currency trading broker.  There are several things to consider to make sure you get the right broker for your specific needs.  Some charge a commission while others  make their money on the spread between the bid and asking price. The commissions and spreads that brokers charge can be quite different.  Make sure you compare several brokers costs and determine what you get for the fees.

To compare the costs that different brokers charge there are some things that you need to be familiar with.  As mentioned earlier many brokers make their money on the spread between the bid and ask price.  The bid is what they will pay you for currency you own, the asking price is what they will charge you to buy the currency.  The difference between the bid and ask price is expressed in pips.  Pips stands for price interest point.  For example, EUR/USD price may be 1.3200/1.3202.  The cost to the trader for purchasing the contract is 2 pips.  On a unit of 100,000 this would be a cost of $20.00.  Look for a broker who has a smaller spread as this will add to your profits.

One of the best ways to find a currency trading broker is to get a recommendation from a friend or someone you trust, who has used the broker and been satisfied.  Be careful of low trading cost advertising.  This may be only for a short time and then the rates will go up.  Also it is important that your broker can service your account quickly and accurately.  You need to have complete trust in the broker you trade with.

Make sure your currency trading broker is regulated by a reputable agency.  Make sure they have not had any problems with the agency.  There are so many brokers out there, you need to do your homework before opening an account so that you don’t find out later you are being scammed.  With a little effort you can find a broker that will be best for you.
Look for a broker that wants you to make money.  If they care about your success then you can both make money.  Be sure that you are not involved with a broker that is trading against you.  You want to chose one that simply matches up trades from buyers and sellers and is not biased to one side or the other.

In addition to getting recommendations about brokers, you can use the online service ‘best online forex brokers’ to help you select the one you will use.  To make the list a broker must be listed in the top 25 by popularity ratings.  The firms on the list are also regulated by at least one government agency and have a clean record.

Market-makers are one type of currency trading broker.  They will take the opposite position that you take.  This obviously will put you at a disadvantage.  It is best to choose a broker in the ECN.(Electronic Communication Network).  These are the brokers that simply match trades from buyers and sellers.

In conclusion, selecting a currency trading broker can have a major impact on your trading results.  Spending the time to research the marketplace will be time well spent.

This currency trading tutorial is intended to give a basic understanding of the FOREX market.  The topics that you need to understand before you start trading are introduced.  Before you are ready to begin trading you must obtain a thorough understanding of these topics.

When you open an account with your broker, you will only be required to deposit a small amount of the trading capital you will be using.  Your broker will lend you the largest part of your trading capital.  This use of leverage will increase the level of exposure you have in the market.  This can multiply your gains as well as your losses.  It is important to pay close attention to this and use stop-loss-orders to help limit your risk.

Currencies trade in pairs.  Some of the most common pairs are the EUR/USD(euro/dollar), USD/JPY(dollar/Japanese yen), GBP/USD(British pound/dollar) and the USD/CHF(dollar/Swiss franc).

The base currency is the first one listed in the pair.  This is the currency that will be purchased. It will be purchased with the quote currency, the second one listed.  For example if the EUR/USD is quoted at 1.37, it means that you can buy one euro for $1.37.  If a pair is listed 1.54 GBP/USD it means that each British pound will cost $1.54.

The currencies have a bid and an asking price.  The price you pay for the currency is the asking price. The price at which you can sell your currency is the bid.  You may be able to buy EUR/USD for $1.37.  If you turn around and try to sell the same contract you may only receive $1.34.  The difference between the two prices is the spread, or brokers commission.

In order to make a profit from trading it is obviously necessary to decide accurately which way currency prices on the base currency will move in relation to the quote currency.  If you believe the euro will move higher in relationship to the dollar you would purchase the euro at the current exchange rate with the dollar.  An example is 1.41EUR/USD.  You will buy the euro at $1.41 because you think the euro will move up and you can sell it at $1.60 in the near term.  If however you think the euro is too high against the dollar, you would sell the euro. An example is 1.61 EUR/USD.  You would sell the euro at $1.61 with the intention of buying it back at maybe $1.41 in the future to close the position.

Another currency trading tutorial may suggest that you use either technical analysis or fundamental analysis to make your trading decisions.  This tutorial suggests that you are better off being familiar with both.  You may decide to put more weight on one or the other but having a good feel for both will improve your trading results.  By understanding the fundamental issues in the market that cause prices to move up and down you will be better able to predict future price changes.  By having a high degree of knowledge on how to use technical analysis, you can use stop-loss orders to help you limit your exposure to trading risks.  You will be able to identify price trends easier as well.  If you can use technical analysis along with the fundamental analysis your chances of success will be increased by a large margin.

While this currency trading tutorial has introduced you to this exciting market, you now need to gain a higher level of understanding of the topics discussed here.  This is a complex and competitive market.  Do your homework.