Trading Forex: A Guide for Beginners, By Beginners

LONDON, March 23, 2012 /PRNewswire/ --

Trading forex can be a daunting prospect for beginners starting to trade the financial markets. Luckily, as the largest and most traded of them all, it is also the most accessible.

So why do so many of us choose foreign exchange when there are thousands of other markets available for us to trade such as stocks and indices?

Trading Opportunities

For one, you may be after the same trading opportunities as me when I was a beginner; to trade on the future price movements of currencies, 24-hours a day through a global network of businesses, banks and individuals - to be specific.

By trading on the price movements of a global network, currency prices will constantly fluctuate; offering me and my fellow forex traders multiple trading opportunities from Sunday night through to Friday night.

The forex market opens first in Wellington, New Zealand, progressing to Asia where trading is spearheaded out of Tokyo and Singapore; it then moves to London before it closes in New York on Friday night. (I wish my schedule looked like that.)

The Basics

It's important to get clear that 'foreign exchange' goes by many names, including forex, retail forex and sometimes, quite simply, FX.

However you say it, you'll still be trading on the same market that has an average turnover of US$4 trillion per day - which compared to the New York Stock Exchange's daily turnover of around US$50 billion - it's easy to see how you're not the only fish in the forex sea.

As we've now clarified; forex is popular, but why? Apart from its accessibility, I was also drawn to its liquidity; foreign exchange is the most liquid market in the world after all.

Liquidity

Liquidity, for those of you who don't know, is a characteristic of a market based on the level of ease a you can buy and sell at.

When looking at the forex market; as mentioned above, it has high liquidity. What this means for us is that its spreads tend to remain tight throughout the day, giving us traders the upper hand in the marketplace as we can trade in and out of the market freely and normally at tight spreads, regardless of the time of day..

It's imperative, however, that we all keep in mind that there is equal potential for losses if the market moves against us.

When talking about spreads and pips, it's probably a good idea to talk about who offers what. For example, if we look at forex trading provider, City Index, they offer some of the most competitive spreads starting from just 0.8 pips on EUR/USD.

Summary

So for now, we've covered the basics of trading forex - hopefully it's helped those of you considering trading the foreign exchange market and you've decided whether or not it's for you.

Even at this preliminary stage, it's important to remember the risks involved with trading a leveraged product such as forex. It's not uncommon to incur losses at every level of trading, so putting in place a risk management strategy is imperative to your trading success.

For more information, please refer to spot forex provider City Index: http://www.cityindex.co.uk

Remember to manage your risk prior to placing a trade,

The Forex Trader

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting with City Index.

SOURCE City Index