Background you must know before you start trading fx

Or how not to lose your shirt before you even get on the pitch

The Foreign Exchange market (Forex) is the biggest financial market in the world. More than $1.5 trillion changes hands on the Forex market each day as investors buy and sell currency in the hope that their purchases will increase in value.

Until recently, those investors were banks. The minimum investment of $200,000 dollars was enough to keep most members of the public away. That’s now changed. Managed accounts can be opened with $10,000 although some brokerage firms can even get you running for as little as $1,000 — provided you’re prepared to do the buying and selling yourself on the forex markets. In addition to the banks, investors now include multinationals, money managers, dealers and brokers, as well as private speculators.

Those investors are active 24 hours a day. The forex market officially starts trading in Sydney on Monday morning (7 pm Sunday EST) and continues around the world with traders in one part of the globe beginning their day as others end theirs. The week ends when New York traders stop at 3 pm the following Friday.

Although any two currencies which have a buyer and a seller could, in theory, be traded, in practice, more than 85 percent of all daily transactions involve the major currencies: the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and the Australian Dollar. The stable governments and the transparency of the central banks in those countries make it easier for speculators to predict what the currencies will do and to minimize risk.

And of course, there is risk in the Forex market, and that’s especially true when you’re just starting. Like any type of investment, it’s important to understand what can cause values to rise or fall, to develop an investment plan and stick to it, and to spread your risk.

The best strategies often come with practice, so a good way to start trading forex is to open a demo trade and treat it as though it were the real thing. You won’t make any money but the education could be worth a fortune!

Open a demo account with paddypowertrader.com and start practising today.