Many people, particularly in the present economic climate, think that a quick and easy way to make some money is to trade on the Forex market. However, trading currency is a high risk strategy and unless you know exactly what you are doing, it is a fast way to lose capital.

Forex is the buying and selling of foreign currencies. Originally this was the domain of the big banks, but now anyone with a fast internet connection can trade from their home. The idea is to buy another currency that you think will increase in value in order to make a profit. However for every trader who makes a profit there is another who makes a loss and on the Forex market a small trader is competing against the experience of the big institutions. 95% of all new traders lose money. In order not to be a loser you need to really know what you are doing and this is why a dummy trading platform is so important.

There is a Forex money market open somewhere in the world around the clock, as one market closes another opens. When the markets are busy the value of a currency, particularly the most actively traded, can change rapidly. Trading on the market is done through a broker, similar to a stock broker although no commission is paid, instead there is a difference between the buying and selling price. Buying a currency means paying more than the selling price and the currency has to increase in value by that amount before you can start to make a profit.

It is vitally important that you understand the trading platform you are using. Beginners are advised never to simply open an account and start trading. It takes time, months in fact, to fully understand the market and even the most experienced traders do not make 100% profits. Fortunately brokers do not expect you to start trading immediately, the majority offer dummy platforms where you can practise until you are confident enough to commit your cash!

Platforms can be very confusing to a newcomer and it is essential to understand exactly what you are doing. When you feel competent open a mini Forex account with a few hundred dollars and start trading small amounts using stop/loss orders to prevent losing all your investment if the market moves against you.

Forex currency trading is not for everyone. Never invest what you cannot afford to lose. This article is for information only and the author accepts no liability for any action taken.

Source by Margaret Tye