Forex trading is the exchange of the currencies of different countries against one another. For example, the United States has the US Dollar and Europe has the European Dollar.
To make a forex trade and invest in the United States, while simultaneously expecting Europe's currency to drop in relation to the USD, you would "go short" on the EUR/USD.What is a currency pair?
To make these kinds of trades you will need a forex trading account. To open a forex trading account, you'll need to find a forex broker. A forex broker is an intermediary that takes bulk forex trades and passes them to the market. For this service, there is something called a spread, which is basically a small piece of the money that the broker takes out of your trade whether you profit or not.What is a forex spread?
If you are apprehensive about putting your money in a live forex account, you can choose to open a forex demo account instead. A demo account operates very much like a regular account with the exception that the money is not real. Demo accounts are a great way to learn the mechanics of forex trading and seeing how the market works, but they can be a little misleading. When real money is on the line, entering trades and holding them through any kind of duress feels very different.Benefits and drawbacks of using a demo account
Managing risk on a demo account
Get educated and read everything you can get your hands on. Understand the markets that you intend to trade, don't just go trading blindly trying to make some fast cash, that doesn't work very well in the long run. If you know about and understand what you're trading, you will be more confident about the trades you make.
Most importantly, if I could stress any point to you to be a larger than life point, I would tell you to learn about risk management. Traders in any market trading without risk management don't last very long. For forex, that effect is magnified because of leveraged trading. If you don't understand leverage, you probably should tackle that before anything else.
Introduction to Forex Risk Management
Forex and Leverage
No matter what sales pitch you read, or what else you are told, absolutely do not just jump in and start trading real money until you understand what you're doing. Forex is an exciting and fun market, but it also wipes out the majority of the people that try to trade it, because they don't bother to learn about trading the way they should be trading.To win in the long term, you have to understand the markets you trade and the risk that they represent. Otherwise, you might as well be flushing that money down the toilet.
Source: http://forextrading.about.com/od/forexbasics/a/Learn-Forex-Trading.htm
