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Forex trading is one of the fastest ways to make money online with a small investment. This could be as small as 50 US dollars or as large as a hundred thousand US dollars. The idea, though, is to start small and take each small step with a great deal of caution. As with all money-making programs on the internet there are more scams than there are genuine programs. Foreign exchange trading is a great way to earn substantial money online with a little bit of training and practice.
To begin with you should start understand the mechanics of foreign exchange brokers. Brokers allow you to make a small deposit and then give you a leverage that makes trading foreign exchange profitable. This leverage can vary from 100 to 500. This means that if you make a deposit of a hundred dollars you can trade 100 x the leverage. So, if you deposit 100 USD and your leverage is 200 you can trade 20,000 USD per trade.
You make money online with each trade if the currency you have bought increases in value. This increase will be in PIPs, meaning percentage in points. Each PIP is 1/10,000 of the base currency. So, if you have bought 20,000 USD with your deposit of 100 USD and leverage of 200 you make 2 USD per PIP the currency increments. This increment could be, and usually is within seconds.
The broker makes his profit through a system called the "spread". This is usually 2 PIPS but should not be more than 3 PIPS. When a broker offers a spread of 2 PIPS he is allowing the trading platform to sell your currency 2 PIPS above the market price. This means that you buy the currency of your choice at a loss literally and have to wait for it to increase in value by 2 PIPS before you break-even. Then every additional increment is your profit.
You should stick with the most reputed brokers even though their minimum deposit might be a little high. They ensure that your orders are executed on time ensuring your profitability. Some brokers will delay the execution of your orders and lead you to lose money. Some brokers will set their systems to quote higher than the market prices that increase their profitability with each trade.
Do some research. First of all pick the right broker. Do not go in for the 1 PIP spread brokers. They cannot possibly ensure that your trades will be executed. Then read a lot of Forex reviews on different sites and on forums. Go to the regulator sites such as the NFA and find out if the broker has ever had a dispute with any trader. This is good way to ascertain the credibility of the broker you wish to work with.
One good strategy would be to earn some money online through the slower processes of paid surveys and "paid to post" programs. When you have earned the money required for investment in the Foreign exchange markets you can go ahead and open a live account with a reputed broker. While you make money online through paid surveys and other programs, open a demo account with the broker of your choice and get a feel of the Forex markets with the practice account. This is one way of ensuring that you make money online through FX trading.
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