The forex market is a great place for individual investors, large and small, to engage in thrilling, fast-paced and potentially profitable trades. But you can’t participate in forex currency trading if you don’t first have a forex brokerage account. While most stock-market brokerages allow you to also trade bonds, mutual funds, and other financial instruments, forex brokerage accounts are typically standalone entities. Here is what you need to know about opening a brokerage account.
Leverage
One of the major benefits of trading currencies is the tremendous amount of leverage even small-time traders are allowed. Typical leverage is 100:1, meaning for every $1 in your brokerage account, you can control up to $100 in currencies. A thousand dollars would thus allow you to control $100,000 worth of currency, so if the currency went up by 1% — $1,000 — you would actually double your money! But if the currency went down by just 1%, you would lose all $1,000 of your investment. What would happen if the currency went down by 2%? Well, theoretically, you would lose $1,000 above and beyond your initial investment, but in reality, a brokerage firm will...
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