Must Know Facts About the Online Forex Trading Business

You may be asking yourself "What is an online Forex trading business"? Simply put, it is a business, usually online that uses the Forex or foreign exchange to buy and sell foreign currency. This business can either be a corporation or single individuals who trade on Forex.

Online Forex trading business is one of the most popular ways to trade online since it does involve foreign currency. By this business being online, it is open 24 hours a day so that you can trade without fear. These businesses are becoming more popular online both as a commercial business and as an investment practice.

These online forex trading businesses are becoming more prevalent on the internet. There are rules and regulations that govern these businesses much the same as the rules that govern any financial institution or stock exchange.

The benefits of these online forex trading businesses include open 24 hours a day so trading can be done at any time, no commissions and micro or mini accounts just to name a few. There is also no fixed market like there is with the stock market. There are many individuals and corporations that are online that are willing to help beginners learn the trade.

Why You Should Treat Forex Trading as a Business

If you trade the forex market you will undoubtedly be aware that it is a high risk venture. Most traders who trade currencies end up losing money. Unfortunately, some traders end up losing a substantial part of their net worth.

Many traders, especially new traders are attracted to forex because they see brokers offering ?200 to 1 leverage? and in some cases even higher amounts. It is a common belief amongst new traders that they can use this leverage to generate a substantial amount of wealth. This belief nearly always ends in tears.

To be a successful forex trader, it is imperative that you treat trading like a business. It is unlikely that you could put $50 in to a business and turn it into $20,000 in a short frame of time. Granted, there are exceptions, but they are EXTREMELY few and far between.

You need to apply this same theory to forex trading. One of the biggest reasons traders lose money is having an account size that is too small.

One of the major advantages is forex is that you can effectively borrow as much money as you like from your broker. However, it is important to remember that borrowing money to trade will increase your profits, but it will also increase your losses.

There are no universal rules to state how much you should borrow. Many new traders should start off borrowing very little, if anything. Of course, it does depend on the type of strategy that you use.

If you have a $10,000 trading account, most brokers would allow you to open positions to the value of at least $500,000. If you bought a USD pair, this would be 50:1 leverage. The position size is 50 times the size of your account.

It would not take much of a price movement in the wrong direction to cause a significant loss to your account.

Many new traders start with a small account balance. The same principle can be applied to a $100 account trading a $5,000 position.

The smallest position allowed by many brokers is often $10,000, yet they may still allow you to open an account with $100.

The brokers don't mind, they know that 99% of the clients who do this will blow their account.

The point I am trying to get across is the one of being realistic. Treat trading as if it is a business. Aim for realistic returns. Think about the stock market or mutual funds. They often earn less than 10% per year on average. If you can make 30% per year trading forex, that is significantly higher!

Don't expect to make $1,000 a month from your $100 account. It almost certainly will NOT happen.