Forex Trading

• When you invest in the Forex market, you are investing in foreign currencies. Currencies from two different countries are paired, called a "currency pair," and you are simultaneously purchasing one currency while selling another. Any pair that includes the U.S. Dollar is considered a "major" pair, while others are considered "minor" pairs. Companies that enable you to trade on the Forex market make money on each trade by designating an amount over the market value of the trade when you enter it, called a "spread." Until the trade's profits move beyond the spread, you won't make any money on the trade. Some currency pairs are traded actively, while other currency pairs are not as volatile.
  
  

Investment Amount

• The smallest decimal in currency trading is called a "pip." For most of the frequently traded currency pairs, this is the fourth decimal place. Trades are bundled into lots of 10, 100 or 1,000, depending on the type of Forex account you open and the amount you invest. Your account increases or decreases in value based on a multiplier of the pip, which is why you can make (or lose) money quickly. To trade a standard lot of 1,000 units, most trading companies require a minimum deposit of $10,000. Trading smaller lots requires a smaller investment and produces smaller gains or losses in the account.
  
  

Rolling Over Your Account

• You can roll over all or part of your traditional IRA or Roth IRA into a Forex account. Before doing so, however, you should research the available companies that offer Forex IRAs. Companies have different account requirements and offer varying spreads on trades. If you are hiring a company to trade for you, ask it to provide a history of its trading results that have been verified by an independent auditor. If you intend to trade your account on your own, many companies allow you to trade a practice account before actually investing your money in the Forex market.
  
  

Risk

• Trading in the Forex market is a high-risk investment. The gains can be significant, but so can the losses. When countries that have a major world economic influence release key data, there can be rapid volatility in the market. Unlike stocks, which trade on a specific exchange, currencies trade virtually around the clock, from Sunday evening until Friday afternoon in the United States.