How to Become a FX Trader
FX trading is the buying and selling of currencies also known as forex trading, currency trading or the foreign exchange market. According to the 2007 Triennial Central Bank survey conducted by the Bank for International Settlements. the average daily turnover of the FX market is $3.2 trillion, making it the largest financial market in the world.
FX traders buy and sell currencies based on the relative value of one currency to another. Currencies are traded in currency pairs and FX traders research market trends, world events and technical indicators to execute profitable trades.
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Instructions
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How to Become a FX Trader
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Choose an online broker to execute FX trades. Research the reputation, cost and trading software offered by each broker. The amount the broker will charge in commissions for each trade executed is one of the most important aspects to review when evaluating brokers. Additional factors to consider are quote availability, trade execution times and technical analysis tools. Read reviews from other FX traders and see if you can open a practice or demo account with the broker before opening an official account.
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Open an account with a FX broker. Follow the instructions on the broker's website to open and fund an account. Make sure to properly fill out important information, including bank account and mailing address. Do not fund the account until significant time has been spent using a demo account with the broker.
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Learn standard FX industry terms such as pips, leverage and currency pairs. FX traders and brokers use specific terms to communicate and it is important to be fluent in industry standard terms. A good source for learning FX terminology is fxwords.com.
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Research FX markets and currency pairings. Learn how to perform technical analysis on market trends using techniques such as Fibonacci retracement and the charting software included with a brokerage account. FX traders spend many hours trying to identify trends for specific currency pairings in order to buy and then sell lots of currency and make a profit. FX trading offers many ways to make a profit, but you must research the different types of trades along with FX markets. Brokerage accounts often offer good information and tools to begin research as a FX trader.
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Execute FX trades to buy and sell currency pairs. Buying and selling currency pairs is very similar to trading in the stock market. Types of trades include market, stop and limit orders that are placed for a specific duration such as "good for the day" or "good till canceled." Most brokers will allow an FX trader to open a demo account and execute trades without using real money. It is important to master the different types of trades before executing a trade using real money.
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Tips & Warnings
Open a demo account with a broker to become familiar with the different types of trades, research software, and terminology.
Focus on a few key currency pairs when beginning and become an expert on those pairs. Don't try to research every currency pair available on the market.
FX trading can result in significant loss of money and is not advisable for everyone. A new FX trader should not start trading with real money until performing significant research and putting in hours of practice with a demo.
