The word ‘forex’ comes from the phrase foreign exchange, forex traders are individuals who engage in currency trading globally with the aim of gaining a profit. For persons who are able to trade multiple currencies regularly it can become a viable income but profit is never sure. Essentially the idea is to buy currency for a particular value then trade it for a higher value but, whether it strengthens or declines depends on the its performance on the foreign exchange market.

Because market values can change without warning and may not do so favorably, forex trading can be very rewarding to some persons while others are unsuccessful. The key to surviving in such an environment is to first understand the basics. Knowing what forex is, how it works and the best currencies to trade are all important. Forex traders must continue to grow and evolve with the market by constantly increasing their knowledge and making necessary changes.

To get started persons must find a broker to open an account with, it is important that the broker chosen is reputable to avoid scams. Initially forex traders needed at least $1000 to enter the market, and although these kinds of accounts offer great potential earnings they barred many persons. The growing popularity of mini accounts which allow starting deposits of $50 in some cases has eliminated this problem.

When choosing a broker there are some terms that are extremely important to know, some of these are: pip, spread, leverage, no debt guarantee, and stop loss function. Persons should strive to get a proper understanding of each term before proceeding. Not all brokers provide the same level of protection so it is important to read what is being offered.

Pip refers to the smallest change in price that a unit can make, 3-5 is standard for small accounts but brokers can drastically increase it for their own gain. The spread is essentially the amount of pips charged so when looking at the spread information try to find a broker that offers a cap or a fixed amount. The leverage offered will help determine the profit made and higher leverages yield higher profits, while no debt guarantee is a feature that ensures an account never goes into deficit. This happens because once the available balance is zeroed your positions close until the account is topped up. Finally, the stop loss function is important because it allows traders to exit trades that may cost them more money than they can afford.

Once you have your account, use the tools provided to understand the market and start practicing. Forex traders need to know the strongest currencies since these are far more likely to strengthen than decline. So far the seven strongest units are the British Pound, Swiss Franc, Euro, Japanese Yen as well as the US, Australian and Canadian dollars.