Top 5 Things You Should Know To Manage A Forex Trading Account

In the recent past, forex trading has emerged as a very strong alternative to equity and commodity trading. It has gained immense popularity as an alternative investment avenue which is not directly affected by equity/commodity price cycles. Having said that, you must bear in mind that the forex market is extremely volatile and proper training is mandatory before you begin to manage your own trading account.

Today we shall discuss the 5 most important things that you should be well acquainted with before you start trading in your forex account.

1. Forex Broker
The inter-bank forex market is truly an international market which is not regulated by any one institution; this has led to a large number of forex brokers opening up in a very short period of time. While many of these entities are genuine forex brokers which are regulated by local financial institutions (NFA, FSA, BaFin etc.), there are a few fly-by-night operators which are out to cheat you and rob you of your money.

The best way out is to open a trading account with a regulated and reputed forex broker which has decent reviews online.

2. Forex Trading Platform
The large number of forex brokers is matched by an equally large number of online forex trading platforms. While MT4 is the commonest and the most widely used platform out there, it may not necessarily meet all your trading requirements.

For instance, if you intend to scalp the forex market, then there are a number of trading platforms superior to MT4. Once again, the best way to avoid confusion is to check online reviews and forex trading forums to identify a good platform for your forex trading account. Also, trading the demo version of any platform will help you ultimately decide whether the platform truly satisfies all your trading requirements.

3. Market Analysis
Analyzing the forex market requires a good deal of proficiency in both technical and fundamental analysis. A good forex trader must also be well acquainted with the latest financial news and announcements.

Since this is not very easy; especially for newbies, you must ideally open an online trading account with a broker who gives you access to a vast amount of training material (guides, webinars, one-on-one training etc.) and a good wire service (Bloomberg, Reuters etc.).

4. Risk Management
The keyword in forex trading is "leverage". Most forex traders use a very high degree of leverage. This varies from 1:50 in the United States to about 1:200 elsewhere. In fact, there are many forex CFD brokers who offer trading accounts with leverage as high as 500 times your starting capital.

Given that the forex market is extremely volatile; such a high degree of leverage can potentially wipe out your forex account in no time. The best way to avoid this is to develop a specific and systematic risk management strategy which limits the amount of capital you risk per trade. If you are new to forex trading you can use educational materials and/or one-on-one training to develop your own risk management strategy. To be on the safer side, test your strategy in a demo account before trading live with real money.

5. Trading System
A good trading system is the key to ultimate success in the forex market. As a trader you can either develop your own trading system (automated expert advisor) or you can purchase one of the many automated trading systems (EAs) available in the market. Trading systems allow you to reap the benefits of forex trading without spending a lot of time in front of the screen. A good trading system allows you to compound your capital in a regular and low-risk manner.

Keeping the above pointers in mind will help you begin your micro forex trading account career on a level playing field. Always remember that the forex market is a high risk/high return market and you must fund your trading account only with risk capital.
Posted in Business News on November 17 at 01:21 PM

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