Miki Mihailescu

Forex Trading The word “Forex” comes from “foreign exchange” but Forex Trading is about currencies. It is about changing the current currency to another currency, from a foreign country. This is necessary when someone travels or makes commerce. As the commerce is now global, with no geographical limits, changing currency is mandatory. The currencies are allowed to flow one against another since 1971 (the accord Bretton Woods). This accord implied the creation of a service specialized in foreign exchange. This service exists in commercials banks helping their clients to develop their businesses; these aren’t the only way to change currencies; similar services are provided using the internet. Forex marketplace is one of the most developed in the world. Individual investors have the chance to compete with the commercial banks; the individuals must set up an account at http://www.forex.com/uk/new-customer.html . The site offers three types of accounts: standard, mini and managed. These types have pros and cons; the investors must study the site’s information and choose the most appropriate for their background. The account types offer different sizes of the initial investment, tolerance for risk, and the time to trade daily. The common account type is the standard one. The investor has access to standard currencies by lots of $100,000. The investor is not forced to put down $100,000 to have the chance to trade; only $1,000 must be in the account for a standard lot to have the possibility to be traded. If a new trader can ask himself about the trading risks. Unfortunately, his loss can be terrible: the minimum in the account, $1,000. The conclusion is the standard account is made for experienced traders. The second account type is mini-trading. This account allows to make transactions with small lots. The mini lot is $10,000. The new clients have the possibility to smaller lots, or without using the account. The account is useful for more experienced traders; they can fix new strategies with no huge amount of money. Is there a minimum capital required? Yes, a mini account can be opened with only $250 - $500. A successful trader must elaborate a plan to manage the risk; mini lots are easier to manage. A standard lot is really risky, but five mini lots will minimize the risk. The third trading account is different; the capital belongs to the trader but the decisions to sell or buy are made by the account managers. The managed accounts are: a. Pooled Funds. The money are in a mutual fund; this fund belongs to some investors and they share the profit. b. Individual Account. A professional (a broker) will handle the account; he will make the decisions for a single investor. The managed accounts require $2,000 for individual account. Remember that the broker will ask for a commission (account maintenance) monthly or yearly. The conclusion is that a person must invest the money into any type of account only if he has the necessary knowledge about forex trading, the difference between the account types, the pros and cons and the risks.