Understanding the basics is a simple but critical component of becoming a successful Forex investor. Once you get started, things are actually rather easy. If you are just getting started, then start here to determine how to place your order and some critical points to be aware of.
What kind of order are you making? A market order is the most common and easiest kind of Forex order. This allows you to buy the currency pair immediately for the quoted price on your screen. Then you need to watch your order to see where it leads and make a decision from there. An entry order, on the other hand, tells the software to execute your order once the currency pair hits the price you have specified. A stop order is basically used to limit loss. The currency pair will only be purchased once your target price is identified (or higher) or sold one it reaches your specified price (or lower). A limit order narrows the price range before your order will be placed. How to distinguish amongst these orders? Determine your ability to watch the currency pair. If you have limited time and may miss your window to sell, you probably don’t want to go with the standard market order.
Understand leverage. This is a critical component to either making money or losing your shirt, so you need to understand how to properly use leverage. Forex is one of the few markets where leverage can really be deployed – and it is one of the highest leverage rates than an investor can attain. Leverage means that you are able to put in an order for more money – sometimes far more – than you have to initially put down. If you are going to take advantage of leverage (and a savvy investor should), then you would benefit from learning how to use stop and limit orders when you trade.
By planning your strategy and understanding how leverage can work for you (or against you), the basics of Forex trading can get you swiftly started!