Getting started with Forex

The forex (FX) market has many similarities to the equity markets; however, there are some key differences. This guide will show you those differences and help you get started in forex trading.

Choosing a Broker

There are many forex brokers to choose from, just as in any other market.

Things To Avoid

• Sniping or Hunting - Sniping and hunting - or prematurely buying or selling near preset points - are shady acts committed by brokers to increase profits. Obviously, no broker admits to committing these acts, but a notion that a broker has practiced sniping or hunting is commonly believed to be true. Unfortunately, the only way to determine which brokers do this and which brokers don't is to talk to fellow traders. There is no blacklist or organization that reports such activity.
  Bottom line: Talk to others in person or visit online discussion forums to find out who is an honest broker.
• Strict Margin Rules - When you are trading with borrowed money, your broker has a say in how much risk you take. As such, your broker can buy or sell at its discretion, which can be a bad thing for you. Let's say you have a margin account, and your position takes a dive before rebounding to all-time highs. Well, even if you have enough cash to cover, some brokers will liquidate your position on a margin call at that low. This action on their part can cost you dearly.
  Bottom line: Again, talk to others in person or visit online discussion forums to find out who the honest brokers are.

Signing up for a forex account is much the same as getting an equity account. The only major difference is that, for forex accounts, you are required to sign a margin agreement. This agreement states that you are trading with borrowed money, and, as such, the brokerage has the right to interfere with your trades to protect its interests. Once you sign up, simply fund your account, and you'll be ready to trade!

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