Online Forex Trading Demo Account Setup

I want to explain a little more about the currency pairs. Currencies are always traded in pairs in the Forex. The pairs have a unique notation that expresses what currencies are being traded. The symbol for a currency pair will always be in the form ABC/DEF. ABC/DEF is not a real currency pair, it is an example of a symbol for currency pairs. In this example ABC is the symbol for one countries currency and DEF is the symbol for another countries currency.

Here are some of the common symbols used in the Forex:

USD – The US Dollar
EUR – The currency of the European Union “EURO”
GBP – The British Pound
JPN – The Japanese Yen
CHF – TheSwiss Franc
AUD – The Australian Dollar
CAD – The Canadian Dollar

There are symbols for other currencies as well, but these are the most commonly traded ones. A currency can never be traded by itself. So you can not ever trade a EUR by itself. You always need to compare one currency with another currency to make a trade possible. Some of the common pairs are the EUR/USD, GBP/USD, EUR/AUD, USD/CAD, etc…

The currency pair looks like a fraction. The numerator (top of the fraction) is called the base currency. The denominator (bottom of the fraction) is called the counter currency. When you place an order to buy the EUR/USD, you are actually buying the EUR and selling the USD. If you were to sell the pair, you would be selling the EUR and bying the USD. So if you buy or sell a currency pair, you are buying/selling the base currency. You are always doing the opposite of what you did with to base currency with the counter currency.

If this seems confusing then you are in luck. You can always get by with just thinking of the entire pair as one item. Then you are just buying or selling that one item. Thinking like this will still enable you to place trades. You only need to be aware of the base/counter concept for fundamental analysis issues.

So why is it imprtant to know about the base /counter currency now? The base/counter currency concept illustrates what is actually taking place in a Forex transaction. I mentioned before that short-selling was restricted in the stock market. Short-selling is where you sell a stock/currency/option/commodity first and then try to buy it back at a lower price later. But in the Forex, you are always buying one currency (base) and selling another (counter). If you sell the pair you are simply flipping which one you buy and which one you sell. The transaction is essentially the same.

You want to be able to short-sell with no restrictions so you can make money when the market drops as well as when it rise. The problem with traditional stock market trading is that the market has to go up for you to make money. With forex trading you can make money in all directions.

Another important concept for Forex trading is the leverage. Leverage is when you can use a little money to control a lot of money. The Forex market is probably the highest leverage market in the world. There are different types of leverage available in Forex trading. The highest leverage possible is 200:1. This means that if you put up $1 margin, the trading provider will allow you to trade with $200. So if the price of the currency pair goes up 1%, you make200*1% = 200%!!!!

The margin for Forex trading is a good faith promise to the trading provider. Other money in your trading account also insures your transaction. You only need to know that the margin is the amount of money you need to place a trade.

Another imprtant piece of lingo is the term “pips”. Since we have the EUR/USD, EUR/AUD, etc…, we ned a way to talk about the number or price. When you see a Forex currency pair price quote, the last digit of the price is commonly refered to as a pip. So if you see a price quote of 1.6118 and then a price quote one minute later of 1.6119, the price rose 1 pip. Similarly, if we see a price quote of 187.50 and then another one 5 minutes later of 187.58, the price rose 8 pips. The pip is always the last decimal place of the currency price quote.

These lessons literally could go on for several years and you still would not know everthing. At this point, you are ready to start demo trading. Once you begin to place demo trades, you will learn a lot about how Forex transactions are placed. This is an important step for you to be able to learn how to become a trader.

Here’s how to get started with your own demo account.
Go to http://fxcm.com/mini-demo-registration.html

There you can sign up for a free mini-demo account. A mini account is just like a real demo account, except the trade sizes are smaller. In a real account the smallest trade size is $100,000; in a mini account the smallest trade size is $10,000 (this can be done with a $50 margin, the power of leverage!).

There are several other places online to sign up for a free demo account. I use fxcm, because they have the best overall reputation online. Fxcm has built itself to the premier Forex trading platform. I don’t get paid anything to endorse them, but they are currently the best.

Once you sign up for your mini-demo account, you will need to try out one of the trial charting packages. Any of these will do because they all have the SMA. You can then set up your demo account and use the SMA crossover method I mentioned in previous post. This is a good way to get used to how orders are placed. Once you have a real trading system, you will already know how to place orders properly.

Everyone makes mistakes placing orders. You need to experiment in a demo account to make your mistake without losing money.

At this point you have to make a decision about how fast you would like to learn how to become a trader. The truth is that the long you wiat to get in on this market, the more potential money you are missing out on. You need to decide what time frame is right for you to begin trading.

You need to decide if:
1. You want to place real trades within the next 3 months (or sooner, depnding on your desire).
2. You want to build your knowledge for several months before placing real trades.

The choice is entirely yours. No-one else can make that decision for you. You need to make a plan and stick to it. It is important not to put off your success. Success requires action.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.