Forex Trading, just what is this and is it a scam, or does it really work? For anyone who does not know what Forex Trading is, it is the exchange of foreign currency?
The primary function of the Foreign Exchange Market (Forex, FX or Currency Market) is for the assistance of international trade and investment, by allowing one form of currency to be exchanged for another form of currency.
An example that I would understand as being a first time person who had no idea what this was, would be if an individual were to go from the United States to Canada, they would go to a bank or currency market to exchange American money to Canadian money, so that individual has Canadian money to buy products, services and food, when they are in Canada, rather than having to deal with the differences of the dollar value between American and Canada.
The average amount of changeover on currency exchange has resulted in 3.98 trillion in the year of 2010 alone. Now that is a lot of money being exchanged! In the case of Forex Trading, this form of currency trading has skyrocketed, and is generally an exchange of currency money to earn a profit from the exchange. An example to be understood would be;
| "Let us now take an example. |
Imagine you made a loss of 20 pips trading in a regular account. That would translate to a loss of $200. However in a mini Forex account the same loss would only amount to $20.
In any business there is an element of risk. That is not to say you shouldn't be taking any risk. On the contrary as you go along you will discover that Forex trading will turn out profitable to the trader who takes optimal risks. But don't throw caution to the winds and take unreasonable risks.
A mini Forex trading account requires lesser capital, lesser emotional attachment, and at the same time affords you the opportunity to build up your skills in Forex trading and gain overall confidence as a trader. In short, a mini Forex trading account prepares you to face the more advanced world of Forex trading in a standard account.
For example, with a $300 deposit in a mini account you could trade a maximum of 6 mini lots. Obviously this is a kind of leverage you don't get to see in the stock market. This is not to say that you use your leverage in one go.
In a mini account you must start with a leverage that is easily manageable so that it offers you greater flexibility in transactions as you go along. Using your leverage wisely in a mini Forex account is important or else you could just as well lose your money quickly.