How to Trade Forex Online

These days it is relatively easy to participate in the forex market by opening an online CFD (contract for difference) trading account. A CFD account is one that allows investors and traders to invest in the forex market without having to actually purchase the foreign exchange. Instead, they invest fractions (lots) of the actual exchange rate dollar value of the currency pair. This investment allows them to enter into a contract with a forex broker with the understanding that the broker will make payments if the investor accurately predicts how a particular currency pair will move.

Forex trading online is really simple and usually just requires an email address and a password to open an account. Usually, there is no need to download any software, as the trading platform is usually fully accessible online. Once an account is opened, the trader or investor makes their investment based on how they think the currency pair will move. The broker places the trade on behalf of the investor by either shorting (selling) or buying lots of the currency pair.

The prediction of how the currency pair will move is essentially speculation and the trader or investor must be correct in their predictions in order to make money trading forex online. If the trader makes the wrong prediction, they stand to lose the invested capital and more. This is because forex trading online is based on the concept of leverage. Leverage allows the trader or investor to use only a small amount of capital (investment) to participate in the forex market, with the opportunity to earn (or lose) multiples of that capital. Forex trading online is risky since traders or investors could lose more than their invested capital. On the other hand, there are real possibilities for making excellent profits.

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