Now that you know a little about forex, you’re probably itching to start your pippin’ adventures. But before you set off on your journey, you need one more thing… An actual account with a broker!
The first step in choosing a forex broker is finding out what your choices are. You don’t just walk into a restaurant, knowing what to order right away, do you?
Which type of broker should I choose? A dealing desk broker? Or a no dealing desk broker? That’s completely up to you! One type of broker isn’t better than the other because it will all depend on the type of trader you are.
Forex brokers will quote you two different prices for a currency pair: the bid and ask price. The “bid” is the price at which you can SELL the base currency. The “ask” is the price at which you can BUY the base currency. The difference between these two prices is known as the spread.
The retail forex market is so competitive that just thinking about having to sift through all the available brokers can give you a major headache. Choosing which forex broker to trade with can be a very overwhelming task especially if you don’t know what you should be looking for.
Here are the bad guys we keep mentioning earlier. Forex bucket shops are brokerage firms that have “questionable” trading practices such as unusually frequent price misquotes or reqoutes, slippage only favorable to the broker, and stop hunting.
While you may feel like a dwarf among big bad brokers, it doesn’t mean that you have to take their abuse! If you are disheartened because it seems that brokers have all the advantage, rest assured that there are a few simple measures to help even the odds.
So after demo trading on at least three broker platforms, you’ve narrowed down your choice to a single forex broker?
By now you’ve learned some history about the forex, how it works, what affects the prices, blah blah blah. ZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ. This is all obviously super important, but know that you’re now thinking…
Technical analysis is the framework in which traders study price movement. The theory is that a person can look at historical price movements and determine the current trading conditions and potential price movement.
Whereas technical analysis involves poring over charts to identify patterns or trends, fundamental analysis involves poring over economic data reports and news headlines. (And nowadays….random tweets from a certain world leader.)
Sentiment analysis is used to gauge how other traders feel about a particular currency pair.
Ahhhh, the million-dollar question… Throughout your journey as an aspiring forex trader, you will find strong advocates for each type of analysis.
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