If you are new to the Forex market, the very first thing you should do would be to take time to understand what Forex is all about and how to invest your money wisely.
What to look for when choosing a forex broker
#FeatureByESBOLimited - You will need to find a broker who can legally broker Forex trading in Kenya
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Once you have gained a basic understanding of what Forex is, then it’s time to begin looking for a Forex broker. However, it should be said that not all brokerages are able to trade in all countries.
Therefore, if you live in Kenya, for example, you will need to find a broker who can legally broker Forex trading in Kenya. Actually, that’s the first and foremost consideration before all else.
Pips, Profits, and Lots
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In all major currency pairs except any pairing with the JPY (Japanese Yen) you will learn about pips going out to four decimal places. On the other hand, any pairing with the JPY will only go out two decimal places. Learning about pips and how to trade for a profit in increments of pips is obviously the first step. Once you have a working knowledge of pips and how profits are paid, or lost as the case may be, you need to find a broker that handles the size lots you intend to trade.
So far, you’ve learned that you need a working knowledge of the Forex currency exchange market and that you trade in increments up to the fourth decimal place, pips. That is, as explained, unless one of the currencies is the JPY in which you would only go out two decimal places. Before going any further, take the time to fully understand pips. Now you are ready to move onto lots.
Lots Brokerages Will Handle
There are three size lots which brokerages will trade and those are labelled as lots, mini lots and micro lots. A trader would need to make a decision which of the three they want to invest in. A lot refers to the smallest size trade for a currency pair. With this in mind, a standard lot in terms of the USD (United States Dollar) is the $100k lot, or a lot with a value of $100,000. New traders will rarely trade that amount, so they have the option to trade a mini lot at $10,000 or a micro lot at $1,000.
Here is where you need to do the research because many brokers will deal with nothing less than a standard $100k lot. Therefore, if you are a newbie looking only to invest $1,000 it is imperative to find a broker that will deal in micro lots. Bear in mind, these are all rated in United States currency, but the strategy is the same with any currency.
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Margin Accounts
There is one other important aspect of the Forex exchange you need to understand. When you open an account with a broker it is going to be a margin account. This is something else you will need to have a solid understanding of when choosing a broker. The best place to learn about margin accounts is on the Investopedia website in this article. They go into detail on explaining what a margin is and how various brokers set the margins they will broker.
These are some of the most important basics you will need to understand when choosing a Forex broker. Primarily, they must be licensed in your country. After that you will need a broker that will let you trade in the amounts you are willing to deposit and the margins you are comfortable betting on. The best advice of all is to take your time in learning the market before seeking a broker. Never invest in anything you don’t understand.
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