Here are some of the frequently asked questions that newbies have about forex, easy-forex takes a closer look.
How much do I need to start forex trading?
The amount you need to start depends on the kind of account you open and the trading limits on that account. Some brokers offer micro accounts that allow you to open an account with as little as $1. Some accounts are meant for traders with a lot of money, such as the Professional or VIP accounts. Such accounts may be opened with at least $20,000 or even $50,000. There are other account types in between.
Generally speaking, experts advise that you start trading with small accounts before moving on to higher amounts. You can also open micro accounts to help you learn more about risk management.
How can I be successful?
Trading forex involves buying and selling one currency against another, so as to make money from the change in the exchange rates of the two currencies. Typically, you want the currency you are holding to add more value so that you can exchange it to get more of another currency than you would have been able to in the past. This is the basic principle. There are various factors that can make a currency gain or lose value against another currency. You may need to be trained to understand these factors so that you can know when to buy a currency and when to sell it to profit from changes in valuation of the two currencies you are trading.
How can I start trading forex?
In order to start trading forex, you must open a forex trading account with a broker. You will also be required to verify your identity by submitting a government-issued ID card (international passport, drivers license or national ID card) as well as submit a proof of address such as bank statement or utility bill. Once your account is activated, you may then deposit money with your broker, who will then fund your trading account. Your broker will also give you access to a forex trading platform, with which you can buy and sell currencies.
I hear forex trading is a scam because many people lose money. Is this true?
It is true that many traders lose money, but this does not make forex trading a scam. Many of the world’s richest people such as George Soros have made money from forex trading. People may lose money in forex because they do not have the correct training on how to trade, how to manage risk and how to control their emotions. Those who make money may be those who have been trained and who have mentors to guide them in the early phase of their trading careers.
How can I tell who is a scam broker?
All brokers must be regulated and licensed by the government authorities in their countries responsible for this activity. Examples of regulators are CFTC (US), CySEC (Cyprus), FSA (UK), ASIC (Australia), JFSA (Japan), AFM (Netherlands), AMF (France and Canada). These regulators set the rules which are meant to protect investors from shady activities and also provide a redress system for aggrieved traders.
Scam brokers are not regulated and because they are not answerable to any authority, they are at liberty to steal traders’ funds either by sharp practices on the platforms, non-fulfillment of withdrawal requests, or account closures without refund. So any broker that does not have a license number or is not listed on the website of any regulator as an approved broker it might be a scam broker.
What documents do I need to start trading?
To activate your account, you will need a government-issued ID (international passport, drivers’ license or national ID card) and a recent proof of address. Some brokers require one document, while some may require that you present two out of the three documents listed.
I have a 9-5 job. Can I trade forex part-time?
Forex can be traded part-time and combined with your job. To do this however, you must use tools that enable you monitor your forex activities on the go, and also select a time zone that will not clash with your daily job. Many employers will not be amused seeing you trading forex instead of doing your office work on your office PC.
How safe is my money in forex?
The only way to keep your money safe is to use a regulated broker that maintains segregated accounts. Forex is risky even with the best broker, however so you should never invest more than you are prepared to lose.
What is a segregated account?
A segregated account is a bank account maintained by a broker in which the only money held there is money belonging to traders. This is now a requirement from all regulators to ensure that if the broker goes bankrupt, your money will not be affected.
Must I open my account in US dollars?
Many brokers allow traders to operate accounts in British Pounds, Euros and Japanese Yen in addition to the conventional US Dollar accounts. However, you can only maintain your trading account with one currency at a time.
I have no computer skills. Can I trade forex?
Trading forex does not require complex computer skills. You simply need to know how to use the mouse of your computer to navigate the trading platform, execute orders and perform certain functions such as attaching an indicator to the chart.
Where can I learn forex?
There are many professional courses on the internet, books and several online and offline resource materials. However, you must ensure you have a reputable mentor to guide you in your early trading steps after you must have acquired some knowledge on how to trade forex.