Making Your First Investment in the Forex Market

4 November 2011
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The foreign exchange market (Forex) offers many advantages to investors but you need to know where to begin. Forex is not simple, though, so you’ll need some knowledge to make wise investment decisions and although it is relatively easy to start trading on the Forex, there are risks involved. The benefit of today’s modern age is information available at your finger tips in the form of ebooks, blogs, trading systems and online brokers. Your first move as a beginner should be to find out as much as possible about the market before risking any money.

When you are ready to proceed, you should first look for a reputable broker. Forex traders usually require a broker to handle transactions. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.

Next, open a Forex account. You will need to fill out a simple form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker’s money.

Once your account has been established, you can fund it and begin trading. Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in Forex trading if your access to large amounts of capital is limited. Trades are technically commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. However, it’s important to keep in mind that Forex involves paying a spread which could make the cost of high volume trading pricey. Brokers make their money on the spread or the difference between bids and ask prices.

Almost every broker operates on the Internet. Once your account is set up, you can access it from any computer just by entering your account name and password. Each broker has its own set of software tools. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers’ websites.

Forex investing is one of the most potentially rewarding types of investments available. Even small changes in the market can result in substantial profits because of the large amount of money involved in each transaction, commonly referred to as leverage. Individual investors should understand that leverage acts as a double edge sword meaning it can work both for and against you. There are a number of software tools available to help investors minimize losses that occur in any type of investment rather its Forex or Stocks. While there is no guarantee that you will actually make money trading Forex, its extremely important to learn about these tools as they can act as a vital component to your trading account and overall success.

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About the Author

This article was provided by Franklin Global Capital LLC, NFA member (#0391263), a Spot Forex and Forex Investment and management firm. Franklin Global Capital provides proprietary forex indicators that help identify attractive investment opportunities in any economic environment. For more information please visit: http://www.franklinglobalcapital.com

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