Beginner’s Guide to Online Forex Trading – Chapter 6: Basic Requirements to Start Forex Trading


Beginner’s Guide to Online Forex Trading – Chapter 6: Basic Requirements to Start Forex Trading

Not much. All you need is a computer provided with a high-speed Internet connection and understanding fully the information provided in this guide to start trading in currencies.

One needs to have an online currency trading account. There are two types of accounts: Micro Account where an initial deposit of $1,000 is advisable. For a Mini Account it would be advisable to start with $10,000.

Funds Required:

Margin trading is a common word used in “trading”. In simple language it means trading with borrowed capital. This method of trading enables one to open positions of huge amounts like $10,000 to $100,000 with small amounts ranging from $50 to $1,000. In short, margin trading enables one to carry out large transactions with very low initial capital. Margin trading in the Forex Market is quantified as “lots”. The term “lots” can be defined as the minimum amount of currency one has to buy. When you decide to “close” your position (meaning completing your transaction – buy & sell), the amount originally invested by you for that particular transaction is credited to your account. Subsequently the profit/loss calculation is done and accrued amount is credited/debited to your account.

Rollover:

Rollover means you carry over your trade to the next day. For this one has to pay or earn interest, which is related to one’s established margin and position. In order to avoid the roll over interest, all your positions should be closed before the end of that particular market day i.e. 5:00 pm EST.

Rollover Interest is a fundamental part of Forex Trading. Every currency trade involves borrowing of one currency to buy another. One pays interest on the currency one has borrowed whilst earns interest on the currency that is bought. If the difference between the two interests is positive, one earns interest or vice versa. It is suggested that you seek more specific information on this aspect from your broker.

Demo Trading:

Almost all Forex brokers allow their potential clients to open a free demo account. This is a “Virtual” account with all “Real-time” features. This account is offered “Free” so that a potential client can learn the ins and outs of Forex Trading without taking any risk. This works as a perfect Tutorial for the Client, generating interest and confidence to go in for Real time Forex Trading.

It is also suggested that you familiarize yourself with “PIP” values and how Profit/Loss is calculated before venturing into Forex Trading. We recommend you practice on paper or using online demo accounts for at least 6 months before you jump in with real money.

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