How to Start a FOREX Trading Business
The Forex (Foreign Exchange) market is the largest and the most liquid financial market in the world with a daily volume of more than $3.2 trillion. Banks worldwide trade on this market by buying and selling world currencies on behalf of their customers while taking the profits from the differing exchange rates. Forex trading can yield high profits, but it is also very risky. But by utilizing various trading strategies and leveraging your initial capital, huge profits can be made in the Forex market.
Other People Are Reading
Instructions
-
-
1
Identify a trading style that you are comfortable with. Some traders like to carry trade. Carry trading involves owning a currency and earning the interest rate (swap rate) associated with that currency. Another type of trading is called Support/Resistance. In this trading strategy, the support level is the lowest price a currency can trade at over a period of time while the resistance level is a price at which a currency can trade. Bollinger Bands are one of the most popular trading styles. This style was invented by John Bollinger in the 1980s and can be used to measure the relative height or depth of the currency being traded.
-
2
Choose the right leverage. In Forex, leverage is a dollar amount that is provided to an investor by the broker that is handling his or her Forex account. It differs from a stock margin account since this type of leverage does not carry any interest. To trade $100,000 of a particular currency, the typical margin deposit would be 1 percent. The investor will only have to deposit $1,000 into his Forex account. With that degree of leverage, the profit potential can be as high as 100 times as well as the potential loss.
-
-
3
Set your stop loss price. A stop loss price is the currency price in which you are willing to sell or get out of the trade in the event that it is losing money. To avoid loosing all your investment, start by limiting your loss at 5 percent per trade. Setting a certain percent keeps you in the game until another trading opportunity comes your way.
-
1
Tips & Warnings
Don't deviate from your risk tolerance to leverage.
Keep your loses to a minimum by adhering to your stop loss price.
References
- Photo Credit Creatas/Creatas/Getty Images
