Learning to trade forex is not difficult. First you need to understand how forex is traded. Every currency is priced relative to another currency. For example, US Dollar (USD) priced relative to British Pound (GBP) is one currency pair. USD priced relative to Euro (Eur) is another currency pair. USD priced relative to Japanese Yen (JPY) is still another currency pair. So when you trade forex, you are actually dealing with currency pairs. The most popular and most frequently traded currency pairs are GBPUSD, EurUSD, USDJPY, USDCHF etc.
The most important thing for you to understand in forex trading is, "Pips" and "Leverage". Pips stands for "Percentage in Points." Most of the currency pairs are expressed up to the fourth decimal place. For example, EurUSD rate is 1.4042. Suppose it changes to 1.4045. So there is a change of 3 pips. Pip is the change in the fourth decimal place. Most of the forex brokers allow you to trade with a leverage of 1:200. Starting with $1000, means that you can control $200,000. But you don't need to start with $1000. You can start with $200 or even lower. You can choose a different leverage ratio also like 1:100.
Suppose you make 3 pips in one hour. You have made $60 within one hour if you are using 1:200 leverage on your $1000 deposit. It's not bad. On the other hand, if you had lost 3 pips, you would be losing $60. If you use 1:100 leverage, 3 pips gain means $30 and 3 pips loss means you lose $30. The more leverage you choose, the more profit you make but at the same time, your risk also increases. Leverage makes forex trading risky and if you don't understand risk management, you can easily be wiped out and receive a margin call.
How do you manage risk in forex trading? Before you buy or sell, you decide how much of your investment you are willing to risk in case you make a bad decision. You do it through a "Stop Loss Order". You also need to be careful about the leverage you want to use. Suppose you choose 5 pips as your stop loss. In case of a buy decision, if the pips decrease by more than 5, the broker will automatically execute your sell order and close your position. You lose $100 on 1:200 leverage and if you use 1:100 leverage, you will lose $50 but at the same time you will be making a lower profit.
Learn forex trading risk free. You don't need to start with real money. In the beginning, you should paper trade on your demo account. You get a virtual deposit of $5,000 on most of the accounts. You can play with this make belief amount and learn forex trading. Once you feel that you have developed the skills to start trading forex on your real account, you can start with real money. Most of the people trade forex on autopilot with a forex robot now a days and make thousands of dollars. Trading with a robot is very easy.
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