We recommend the following steps...

If you are interested in trading currencies, we recommend that you take the following steps...

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1 Learn the Basics

Why do currency rates fluctuate? How does a forex trade work? Learn the nuts and bolts of trading currencies. By reading this series of featured articles, you're already on the right track. It's also important that you understand that trading the Foreign Exchange market involves a high degree of risk, including the risk of losing money. Any investment in foreign exchange should involve only risk capital and you should never trade with money that you cannot afford to lose. Once you know your basics, you're ready to take the next step.

2 Test your skills with a Demo

One of the best ways to see if currency trading is right for you is to try a demo. You can practice your trading techniques with "play money", so there is no risk involved. FXCM offers a FREE Demo with a virtual balance of $50,000. What are the perks? You get a lot of free information and 24/7support to help you ease into currency trading.

• You can evaluate trading strategies with no risk.
• You get free access to a team of professionals 24/7.
• The free practice account is live for 30 days.
• You can Try a demo for FREE

3 Take the FX Power Course and Practice

The best way to learn about currency trading is to ask a lot of questions. If you're unsure of where to go or who to ask, you should take the FX Power Course. It's an online course that gives you access to instructors with years of market experience for less then 20 dollars. You get interactive instruction and feedback 24 hours a day for 8 days, and you get the opportunity to win up to $1000 in the Alumni Trading Contest. How you will benefit:

• Learn to identify clues about future market activity by reading charts.
• Learn to find trends and gauge their potential for profit.
• Learn about important political and economic events.
• Get access to an experienced instructor for 1 year with a live account.
• Learn more about the FX Power Course

4 Open a Live Account

If you're simply interested in diversifying your portfolio, but you don't have the time for steps 1 to 3, you can open a Managed Forex Account through FXCM. Learn More

If you're ready to trade, though, you can start trading now on the Forex Market. If you open a Live Account through FXCM, you will get FREE unlimited access to DailyFX Plus with live streaming news and expert market commentary. These tools are the same alerts and analysis tracked by forex specialists. Open a Live Account

Why we recommend FXCM

Why FXCM? Because FXCM is one of the largest and strongest Forex Dealer Members. They were awarded Best Forex Solution Provider in 2007 by Financial Bridges magazine, Best Currency Broker from Shares, best Retail Foreign Exchange Platform from FX Week and Best Foreign Exchange Specialist from Technical Analysis of Stocks & Commodities.

FXCM offers spreads as low as 1 pip, a multitude of trading tools and 24/7 client service, including over 500 professionals on hand to help you out at anytime. They offer a lot of FREE information to get you started, access to services with an array of technical and fundamental analysis tools, and educational courses, some of which cost less then twenty dollars. Plus, if you just want to mess around and simply test your trading skills without a serious commitment, you can open a Free Demo Account with absolutely no risk.

FXCM Specs:

• Founded in 1999, FXCM is one of the largest and most financially strong forex brokers.
• Over 90,000 live accounts trade through FXCM's trading platforms.
• Over $200 billion in notional volume is traded each month on FXCM trading platforms.
• The FXCM Group has over $120,000,000 US in firm capital.
• Regulated in the United States, Canada, the United Kingdom, and Hong Kong.
• Segregated Accounts are available through FXCM LTD, an FSA regulated entity.
• Find out why FXCM is recognized as a Best Forex Solution. Read the Press Release

There are many Forex Brokers, but not all were created equal. When it comes to your money, you want to be certain that your Broker meets your expectations. It is your right to ask as many questions as you need to feel comfortable about your venture and if you don’t get the answers your want, you should consider finding another Broker.

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Why Size Does Matter

Size matters. Because the Forex market is an over-the-counter market with no centralized exchange, not everyone receives access to the same prices or quality of execution. Institutions with the largest trade volume and the most solid financials have access to better prices and execution. The bigger the broker, the better they are able to pass on the benefits of size, better prices, and better execution to you.

Who Executes Your Orders?

Not all Forex Brokers quote rates the same way. Below are two possible options:

1. Dealing Desk means that your Forex Broker creates the pricing and executes your orders. The spread is usually fixed, which means that traditionally, the spreads are higher than average variable spreads. Check for restrictions on placing orders during news or economic events; for many traders, this is a key time to trade.
2. No Dealing Desk usually means that multiple banks stream competing prices through your Forex Broker, so your orders are executed by the banks themselves. This means that there are usually no restrictions on trading news or economic events, but you should check with your broker.

Spreads

Fractional Pip Pricing

Most major currency pairs are quoted to four decimal places, so a pip would typically equal .0001 or one basis point. Forex Brokers generally round the price up or down to the nearest pip; but some now offer Fractional Pip-Pricing. It ads an additional decimal place, so spreads are usually tighter and more accurate.

Scalping the Market

Many traders favor short-term scalping strategies, which involves placing orders inside the spread. For scalping to be profitable for the client, the market maker must lose, so some Forex Brokers disallow the strategy. This strategy involves a high level of risk.

Rollover

Rollover is interest earned or paid on Forex positions held overnight. It varies depending on the difference in interest rates between a currency pair and fluctuates day to day with the movement of prices. A Negative Roll is when you sell a currency that pays higher interest rate, so you pay interest. A Positive Roll is when you buy a currency that pays higher interest rate, so you can earn interest. Negative Rolls are routine, but not all Forex Brokers offer positive rolls.

The "Carry Trade" is a popular Forex strategy which benefits from Positive Rolls and the high leverage available in the Forex market. For example, if you buy the USD/JPY, you can earn a positive roll. You are essentially borrowing the Japanese yen at a low interest rate cost to buy the US dollar with a high interest rate earning. Remember that leverage can dramatically amplify your losses, so beware of this technique, as it carries a high level of risk.

Hedging

Hedging lets you simultaneously hold BUY and SELL positions in the same currency pair. The most effective way to trade a market if you are uncertain about its direction is to find concrete support and resistance levels. This allows you to pinpoint levels where significant price action will take place.

Hedged positions do not necessarily limit risk as traders can find themselves losing on both sides of the trade. While this strategy tends to work temporarily in range markets, it does not work well in trending markets. Placing stop-loss orders on your positions to mitigate your risk is strongly recommended.

Leverage and Risk

In the Forex market, you can trade on a highly leveraged basis, giving you the ability to control positions much larger than your deposit. This is very useful to short-term traders who need the magnified capital to generate quick returns. Without proper risk management, though, a high degree of leverage can lead to large losses as well as gains. Some Forex Brokers protect your account from falling below your account equity, which is valuable in volatile markets.

Customer Support

Forex trading works 24 hours a day. Does your Forex Broker? When you ask them questions, do they answer them clearly and honestly or do they give you the run-around? If your Forex Broker can’t answer the 15 questions below, you may want to look for one who can.

15 QUESTIONS YOU SHOULD ASK YOUR FOREX BROKER

These questions are based on the above information and relate to basic information that your Forex Broker should answer without hesitation. Or contact FXCM and put them to the test; their friendly staff is always happy to answer these and any other questions you may have.

1. How long have you been a Forex Broker?
2. In what financial condition is your company? Will you show me your balance sheet?
3. Do you have good relationships with reputable banks?
4. Who is quoting the rates, my broker, a bank, or multiple banks?
5. Are the spreads fixed of variable?
6. How tight are the spreads?
7. Do you offer Fractional Pip Pricing?
8. Are there any trading restrictions?
9. Can I place orders inside the Spread?
10. Can I earn interest on positive rolls?
11. Can I earn positive rolls at all margin levels?
12. Are rollover rates displayed prominently? Where?
13. Does the trading platform allow me to hedge?
14. Can I lose more money then I put into my account?
15. What is the quality and availability of customer service?

Be aware that trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Currency trading is when you buy and sell currency on the foreign exchange (or "Forex") market with the intent to make money.

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How Forex Works

The currency exchange rate is the rate at which one currency can be exchanged for another. It is always quoted in pairs like the EUR/USD (the Euro and the US Dollar). Exchange rates fluctuate based on economic factors like inflation, industrial production and geopolitical events. These factors will influence whether you buy or sell a currency pair.

Example of a Forex Trade:
The EUR/USD rate represents the number of US Dollars one Euro can purchase. If you believe that the Euro will increase in value against the US Dollar, you will buy Euros with US Dollars. If the exchange rate rises, you will sell the Euros back, making a profit. Please keep in mind that forex trading involves a high risk of loss.

Why Trade Currencies?

Forex is the world's largest market. With about 3.2 trillion US dollars in daily volume and 24-hour market action, we believe it is a true "step above" the equities market for the serious trader. Some key differences are:

• Many firms don't charge commissions – you pay only the bid/ask spreads.
• There's 24 hour trading – you dictate when to trade and how to trade.
• You can trade on leverage, but this can magnify potential gains and losses.
• You can focus on picking from a few currencies rather then from 5000 stocks.
• Forex is accessible – you don’t need a lot of money to get started.

Why Currency Trading Is Not For Everyone

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for everyone. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. Remember, you could sustain a loss of some or all of your initial investment, which means that you should not invest money that you cannot afford to lose. If you have any doubts, it is advisable to seek advice from an independent financial advisor.