Currency market: Six Forex Trading Essentials
Electronic trading in the FOREX market is open to anyone with a device for connecting to the Internet. Other than funds to set up a trading account, everything else required to participate in the Foreign Exchange market can be obtained free of cost, using technology hardware that most people already own for other purposes.
Online Forex Trading Essentials
• Internet access-preferably high-speed and reliable
• Desk or laptop computer, tablet or smart phone
• Forex broker
• Trading software-often referred to as the trading platform
• Trading education
• Money to fund a trading account
When retail Forex trading first appeared in 1996, few people had high-speed Internet service. Now it is only just short of essential for Forex trading, due to the rapidity of currency price changes and the use by some traders of extreme high-speed algorithmic trading programs. Reliability is key, as anyone who has experienced the panic of having trades on when an Internet connection was lost can attest. Many traders maintain a backup connection, often through cellular service, to avoid being left in the dark during a trading session.
Forex brokers strive to make their trading platforms as accessible as possible to as many people as possible. Most desk and laptop computers possess adequate capabilities and mobile trading applications well within the specifications of even the first generation of smartphones mean that expensive technology is not an absolute necessity.
Selecting a broker requires some research and due diligence, but virtually any worthwhile broker offers free trials for purposes of evaluation. They also offer simulated trading accounts where you can test their trading platforms and service without risking real money.
There are two types of Forex broker, the Market Maker and the Electronic Clearing Network (ECN) broker. Market Makers typically have the lowest trading costs, but they take the opposite position on every trade initiated, so a Market Maker with an impeccable reputation for honesty and transparency is critically essential. ECN brokers match buyers with sellers, offering more objectivity, but their fees are generally slightly higher.
Choosing a broker is one of the most important decisions. Taking the time to read a broker’s legal documents is pure drudgery, but it is imperative to understand the broker’s rules. It also should be said that there is no law limiting traders to one broker, with the only limitation being minimum trading account sizes and available trading funds.
An easy to use, intuitive trading platform facilitates devoting more mental energy to finding and executing trades. Many brokers offer several. Some platforms are installed on the trader’s device, others are web-based using no disc space, and make it possible to trade anywhere an Internet connection exists. Mobile applications for tablets and smartphones provide freedom to carry out routine daily tasks while monitoring the Forex market.
Learning to anticipate and react to currency price changes is essential in order to make the best possible trading decisions. Brokers and third parties offer terabytes of this information. It should be considered an ongoing process from the introductory level to the most highly advanced, somewhat akin to how a doctor continues to study medicine to remain current.
The most essential aspect of trading funds is that they hold no emotional connection to the trader, that is, traders should only use money they can afford to lose without physical or psychological consequences. Anything less than complete detachment from the trading funds is an invitation to money-losing emotional trading decisions.