So, you have decided that you will trade the currencies online and now you are looking for the start-up point, then make sure that you read this article. To kick off your online trading business in a good way, you need to open an appropriate account. Here, we will give you an overview of how to set up your account for trading. In our discussion, we will also mention a bit about forex trading techniques too.
Opening the forex brokerage account
When you step into this market, you will be in need of opening a forex brokerage account. It is pretty similar to the equity market, and the services you get varies depending on your broker. Certain common things are listed below.
Leverage is given to a client by the broker. It is an option through which you can invest more while you have very little of your own capital in it. The amount you can get through this option differs depending on your account. However, mostly, the ratio is 50 to 1. Certain brokers may take it up as high as 250 to 1. The simplest way to understand it is that as you pay 1 dollar, you can control 50 dollars over it if you have 50:1. So, adding $1K to your account means that your broker will permit you to control $50K. However, it draws back your margin as in equities it is mostly at 50%.
Commissions and Fees
The next thing you need to deal with is the commissions and fees. You can open accounts with some brokers that are basically commission free. It is because you step and deal with the market directly through forex accounts. You do not have to rely on the brokers. However, you need to note that there are market makers that will still capture the difference. For example, if the bid by ask is 5200 by 50, the difference of 50 will go to the market makers.
On the other side, forex brokers do not make money until you make a wide spread deal.
There are some common techniques in forex trading, much similar to the ones that are in the equities market. The simplest way to trade is by the currency pairs. You will play with the value of the pair, and if it changes favorably, you will be able to make money. For example, the USD CAD pair will make you money if the value goes up and lose in case that it falls.
The second way is by using the derivative products. In it, when you buy a currency pair, you get the right to buy a pair of currency at a particular rate before a specific point in time. Such contract creates an obligation that you have to buy it no matter what the situation is.
So, this is an overview of how to get started with the online trading business. Note that you will get familiar with it as you make the deals. Even if first few deals do not go in your favor, you must not lose the hope.