The popularity of Forex trading has attracted many retail traders towards it. The market is so large and the daily volume of trading so high that people feel that they will be able to benefit in some way or another if they dapple in it. However, there are various facts about Forex trading that you need to know before you decide to take the plunge. Forex trading is a zero sum game and while there are many who make money in the bargain, there are also those who lose a lot of money if they do not play their cards right. Here are some of the facts that you need to know before you decide to try your hand at it.
Forex trading is not easy – Those who feel that Forex trading is easy because it allows you to trade from the comfort of your home, need to understand that this comfort will come with a lot of stress and tensions. The Forex markets are extremely dynamic and you will need to stay on top of the happenings in the world if you want to become a successful Forex trader. In addition to that there are many things that you will need to learn and comprehend about Forex trading before you start. Choosing a good Forex broker and learning the basics is extremely important. Without this investment of time and money, things can go awfully wrong.
Forex brokers charge a commission – While it is true that Forex brokers do not charge a commission, you need to understand that Forex brokers are not doing a charity service by working with you. There is something called a spread in the Forex markets. This is the difference between the sell price and the buy price at a Forex broker. The difference is called a spread. The Forex brokers make their money and their profits from the spread. The amount that you actually pay the Forex broker comes from this difference and it can be fixed in nature and variable too. But a small tip will say – some brokers are much better then the others, so you can read markets.com review and find out about it.
Low capital requirements – Many people feel that they need large capital in order to start off in Forex trading. This is a myth that has come about because of the standard lot size that a Forex trader is expected to maintain when trading in currencies. For one, you need to know that while there are standard lot sizes, there are also mini trading accounts that Forex brokers offer. These mini accounts can trade in smaller lot sizes too. On the other hand, there is also the aspect of leverage that can be used. The leverage is the ratio of the amount of money that you can trade with and the amount of money that you actually deposit in the bank.
Forex trading is not gambling – Those who are against the concept of Forex trading feel that it is like gambling. It is true that there are no guarantees in Forex trading but there are various kinds of analysis that you can carry out in order to predict the manner in which the currency rate shall move.