Why trade forex?

Why Trade Foreign Currencies?
There are many benefits and advantages to trading Forex. Here are just a few reasons why so many people are choosing this market!
• 24 hour trading- One of the major advantages of trading Forex is the opportunity to trade 24 hours a day. This market never closes, making this type of opportunity attractive for part timers who need the flexibility to trade morning, afternoon or night. This also gives you a unique opportunity to react instantly to breaking news that is affecting the global markets.
• Leverage- This is a huge reason investors are attracted to Forex trading. Leverage gives the trader the ability to invest a small amount of capital to control a much larger position. The larger position or contract size allows the trader to make huge gains on small price changes. Using a small margin account with leverage gives the trader the ability to make nice profits on trades while keeping his risk capital to the small amount he initially invested.
Examples...
200 to 1 leverage means that a $50 dollar margin deposit would enable a trader to buy or sell $10,000 worth of currencies. Similarly, with $500 dollars, one could
trade with $100,000. Warning... leveraging can get you into trouble if overused
and can work against you, so proper caution is warranted.
• No commissions, no clearing fees, no exchange fees, no government fees and no brokerage fees- Because there are no commissions, active traders like the Forex market. Brokers are compensated for their services through the bid-ask spread. On the spot currency trading eliminates the middlemen, and allows you to trade directly with the market responsible for the pricing on a particular currency pair. Therefore, your account is not attacked with extraneous costs and fees.
• No fixed lot size as in futures markets- In the futures for example a
standard-size contract for silver futures is 5000 ounces. In spot Forex, you
determine your own lot size, therefore traders can participate with accounts as
small as $250 and control large lots/profit potential through leverage.
• Stability of the Market- The Global reach of the foreign exchange market is
enormous. There are so many banks, brokerage firms, institutions and
government entities involved that no single player (not even a central bank) can
control the market price for an extended period of time. In contrast to stocks
where a single transaction or rumor can destroy your investment, the Forex
market provides superior stability.
• High Liquidity. Because the Forex Market is so enormous, it is also extremely
liquid. This means that under normal market conditions, with a click of a mouse
you can instantaneously open or close a trade without having to wait for
confirmation. Therefore, you can continue with your trading system without
having to be stopped because your trade is stuck in limbo! You can also
automatically set predetermined stop loss and limit orders to prevent losing or
lock-in profits at a specific level. This allows you to rest and have automation
work for you!
• Profit potential in falling markets- Regardless if a currency is strengthening or
weakening there are always trading opportunities because of the relationships
between currencies around the world. When you trade currencies, they literally
work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa.
• Free Demo Accounts, News, Charts,Expert Blogs and Analysis- There are
numerous free charting services, free demo trading accounts and tons of free
online resources. In fact, it is recommended that you start with a demo account if
you are new to trading in the Forex market.
• And Finally... Low startup trading capital- You can actually startup a mini
account for under $300. Therefore, the common person can access this lucrative
opportunity.

Order Types
Common order types used in Forex trading
• Market Order- This market order is executed at the best possible price obtainable at the time the order reaches the forex trading pit. Most common order type.
• Limit Order- This limit order is an order to buy or sell at a designated price. Limit
orders to buy are placed below the market; limit orders to sell are placed above the market. This is not as common as market orders and may result in not getting
your order filled if the price never reaches the limit you set.
• Stop Orders- Stop orders can be used to minimize a loss on a long or short
position or to lock in profits on an existing long or short position that is profitable.
Also, it can be used to initiate a new long or short position. Fundamentally. this
order acts like insurance to ensure we can hold a position on expectation of future gains, while protecting us in case the position turns against us. Once the stop price is touched, the order is treated like a market order and is filled at the best possible price.
• Stop-Limit Orders- This is a Stop order just like above, except there is a limit
price attached to which you want to be filled. There is a danger in using this type
of trade since you may not get filled at the limit price you requested.
• Time Triggers- Specify a time for your limit and market orders to go live.
Example: If you wanted to place a buy order based on the release of some news
event and wanted to execute your order when that exact time came.
• Trailing Stop- This is one technique I really like because it allows you to place a
stop that trails your position's price, maximizing profits while protecting against
losses. In fact, it protects you from losing what may have once been a profitable
trade on paper!
How to choose a good broker?
Before trading Forex you need to set up an account with a Forex broker. So what exactly is a broker? In simplest terms, a broker is an individual or a company that buys and sells orders according to the trader's decisions. Brokers earn money by charging a commission or a fee for their services. You may feel overwhelmed by the number of brokers who offer their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you insight into the services that are available and fees charged by various brokers. Is the Forex broker regulated? When selecting a prospective Forex broker, find out with which regulatory agencies it is registered with. Besides, a good broker will provide you the following:
• Low Spreads. In Forex trading the spread is the difference between the buy and
sell price of any given currency pair. Lower spreads save you money.
• Low minimum account openings. If you are new to Forex trading you want to be
able to open a micro account with less than $300 dollars, preferably. If you are just starting out trading Forex, do not open your account with money you cannot
afford to lose. I know most people don’t have millions of dollars in risk capital to
trade, so being able to open a small account or even a demo trading account is a
wise choice.
• Instant automatic execution of your orders. Do not work with a firm that
re-quotes or adjusts prices after you click on a price. . This is very important when trading for small profits. You want a WYSIWYG (pronounced wiz-ee-wig)
broker! This means you want instant execution of your orders and the price you
see and "click" is the price that you should get...WYSIWYG = What You See Is
What You Get!
• Free charting and technical analysis- Choose a broker that gives you access to the best charting and technical analysis available to active traders. Look for a broker that provides free professional charting, tutorials and allows traders to trade directly on the charts. Do not be afraid to ask the firm questions to ensure they understand what you are trying to accomplish and that you welcome information on becoming a better trader.
• Leverage- Leverage is a major reason investors use Forex trading since it allows you to control a large position with a small investment. Leverage can make you extremely rich. Unfortunately, if used incorrectly, it can cost you dearly . By using an automated trading robot that helps control your risk and using sound investment risk versus reward philosphies you will stack the odds in your favor. As an inexperienced trader, you don't want too much leverage. A good rule of thumb is to not use more than 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts