Beginner Forex Trading - What Every Beginner Should Know About Currency Trading

Beginner Forex Trading - What Every Beginner Should Know About Currency Trading

by Harold Hsu

Forex trading is a very appealing way to make money online. Trillions of dollars exchange hands every day, and entire fortunes are made and lost literally overnight.
Part of the attractiveness of the Forex market is the ability for retail traders to trade on margin. Margin trading essentially involves the ability to trade a large sum of currency using only a fraction of your own money.

For example, when trading on a margin of 1:100, you can control $10,000 worth of currency using only $100 of your own money. This is what lures many amateur traders to take part in this multi-trillion dollar market - the potential to make a lot of money, by risking only a little of your own.

Understanding The Risks Of Margin Trading

Although margin trading is indeed a great way to make big bucks, beginner traders would do well do remember that it's actually a double-edged sword - it's just as easy to lose money as it is to win. So even though one can make potentially $300 in an hour, it's also equally likely for that person to lose the same amount within an hour (or even in a shorter time period!).

There Is No Central Governing Authority

The next thing beginner traders should know is that there is no official governing authority in the Forex trading industry. What this means is that unlike other financial trading exchanges where there is centralized control (such as the SEC for the stock market), the currency exchange market is not regulated by any organization at all.

This poses an extra risk for retail traders as it leaves the potential for scam 'brokers' to set up shop, take your money and basically run away with it.

That's why retail traders will have to be extra careful when choosing a broker to work with. Where possible, do try to find reputable brokers such as big banks or other well-established trading houses.

You definitely wouldn't want to risk having your money cheated by scammers who are looking to make a quick buck at your expense.