Forex Walkthrough

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Level 2 Markets - Research And Testing

When trading anything, you never want to trade impulsively. You need to be able to justify your trades, and the best way to do that is by doing your research. There are many books, newspapers and other publications with information about trading the FX market (but none better than the Invetopedia Forex walkthrough you're using right now!). When choosing a source to consult, make sure it covers:

-The basics of the FX market
-Technical analysis
-Key fundamental news and events


Because the FX market is driven primarily by technical indicators (which we will discuss in detail later in the FX walkthrough), the most important topic a new forex trader should study is technical analysis. The better you get at technical analysis, the better you can trade the FX market. (For further reading, see our Introduction To Technical Analysis.)

When it comes to newspapers, seasoned foreign exchange traders typically refer to publications which contain a heavy helping of international news. Trading FX involves looking past simple economics, since politics and geopolitical risks can also affect a currency's trading behavior, so it's important to keep up with major non-financial news from across the globe. To build a solid foundation in FX trading it is important to keep up to date with key fundamental and technical developments in the forex market.

Test Drive
Once you've found a broker, the next step is to take a test drive. The best way to test a brokerage's software is by opening a demo account. The availability of demo or virtual trading accounts is something unique to the forex market and one that you'll want to exploit to your advantage. The goal is to learn how to use the trading platform and, while you're doing that, to find the trading platform that best suits you. Most demo accounts have exactly the same functionalities as live accounts, with real-time market prices. The only difference, of course, is that you are not trading with real money.

Demo trading allows you not only to make sure that you fully understand how to use the trading platform and become comfortable with its ins and outs, but also to practice some trading strategies and to make money in a paper account (virtual account) before you move on to a live account using real money. In other words, it gives you a chance to get a feel for the FX market. (To learn more, see Demo Before You Dive In.)


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