However, this low margin and high leverage is also the #1 risk and cause of loss among novice Forex traders. Misuse of leverage is the Forex cardinal sin. In the article below I’m going to explain the new leverage rules, and show you exactly how to take advantage of it! To give you even more I put together this Free Forex Toolkit with an entire video section dedicated to using the new leverage rules to consistently profit…GET IT HERE.

What do we mean by low margin and what is leverage? Well basically this means that you can control a huge amount of a currency in the Forex market with a very small cash outlay. The normal stock and index options that we trade at BigTrends.com represent 100 shares of stock — you pay a premium to control/own this option. For example, in the stock option market you may be able to control the right to buy 100 shares of IBM for $500 — this is an example of leverage. However, the leverage in Forex is much greater than this in most cases … but so is the risk.

We only have to look at the recent housing market crash to see an example of where leverage and low margin caused massive losses among individual investors. People across the world were buying houses and properties beyond their means and with very little cash down. Many of these were speculative, greedy bets on a continued sharp rise in housing prices — which knowledgeable, experienced traders such as ourselves knew wouldn’t continue forever. They weren’t bad homeowners; they simply misused leverage.

The huge amount of potential leverage and low margin requirements in fx trading is similar to this. The latest rules allow Forex leverage for 50:1 on major currencies and 20:1 on minor currencies. Some brokers may still be able to offer 100:1 leverage. What this means is that a trader can often control millions of dollars of a currency proposition with a very small cash outlay. When novice traders allow emotions such as greed and fear to rule their trading, they often end up on the losing end of large leveraged bets.

Thanks for reading, and I’ve got a lot more where that came from! While I write my next article get my Free Forex Toolkit that will put your Forex trading on the right track!

Article compliments of Scott Downing, Director of Research at BigTrends.com

Because you will typically be able to trade in large volume and liquidity your technical analysis software will be more accurate. That is an excellent reason to trade in the Forex market. However, you need to make a point of trading the ideal hours and market, typically London where the largest volume is.

The Forex market offers you the option of 100 to 1 leverage. Higher leverage can certainly lead to more Forex profits in your Forex trading. It can also lead to the loss of all of your capital. This reason is a mixed one. For the professional, highly skilled, highly experienced trader there will be very select times when trading with a high leverage will be the way to Forex profits on very clear market moves with high volume and exceptional liquidity.

However, most professional, highly skilled, highly experienced traders in the Forex market have survived and made their Forex profits by following a well thought out, conservative, Forex trading plan that does not include 100 to 1 leverage.

You can make money working at home a few hours a week. Right! There are folks out there making trades who have been doing it for years, have incredible experience, are connected insiders in the international financial community and you are going to beat them at their own game in your spare time?

Forex trading in the Forex market is a job. Forex trading can be a very lucrative job with wonderful Forex profits. You make your Forex profits in the Forex market by doing your homework, knowing your Forex software, and being well versed in the Forex market currency pairs you work with. But Forex trading is with real money and for every person who makes Forex profits there is a person who does not.

If you have an internet connection you can trade in the Forex market. Make that, “If you have a reliable, high speed, internet connection and have all of your computer gear and software set up, you can trade in the Forex market anywhere. You do not want you internet connection to go down just when you need to buy or sell and then find that when you get back on line that you have lost your shirt!

Since you will be trading a limited number of currency pairs you will need to do less analysis than if you are in the stock market where there are thousands of stocks. It would be an extreme rarity to find someone who personally trades thousands of stocks. Doing a good job of keeping track, of more than a few stocks, can be difficult.

Certainly dealing with one currency pair can help you narrow your focus. However, the number of factors that affect currency values is huge and can be overwhelming unless you make it a point of keeping up with the essentials. Otherwise your research in the Forex market can come to resemble someone trying to keep up with thousands of stocks.