You’ve heard about all the possibilities open to you if you start trading Forex. You know how accessible it is to beginners, with no prior trading experience. You’ve found the time for it and you’re ready to go. Now you just have to figure out how to get started in Forex. The right start can determine whether you’re successful.
There are some basics that you need to know before you start trading Forex.
Choosing a broker
A broker is essentially the middleman between you and the Forex market. When you make trading decisions, you need a broker to actually execute them for you. So who should you choose to be your broker?
First and foremost, you must choose a broker who is regulated by the proper authorities. This will keep you and your money safe from fraud. Most countries regulate trading through their financial authorities. Brokers need a license from the relevant authority. If a broker is not licensed, find someone else.
Another consideration is what model of order execution to use. In other words, how does the broker put your trades through? There are 2 types:
- Dealing desk brokers or market makers “create” a market for you. They do this by showing actual price quotes but never putting your money through to the interbank. Instead, they keep your money if you lose, and pay you out of pocket if you profit.
- No dealing desk brokers (ECN) work as access providers to interbank rates. ECN accounts allow more market depth with floating spreads and longer order execution times. Instead of trading with the broker, you are trading with one of the millions of traders worldwide.
Both options have their advantages and can be used safely, as long as they are licensed by the relevant financial authorities.
Choosing an account
In order to start trading Forex, you need a trading account. A trading account is similar to any other debit account, except that you can use the funds to trade.
Most brokers offer a variety of trading accounts. The standard account offered is usually the best choice for a beginner. This account will usually allow Forex trading, CFDs, metals and energy futures trading. The minimum deposit will be around $100 to $200, so if you just want to feel the waters, you might want to use a micro account.