With the increasingly widespread use of the internet, foreign currency trading has never been more accessible to investors. The participation of large international corporations, hedge funds and banks makes the foreign currency (Forex) market the most highly traded and most liquid market in the world. The Forex market is open 24 hours a day, 5 days a week, with more than $1.4 trillion dollars changing hands every day.

This tremendous liquidity together with the availability of different currency pairs can result in a high level of volatility on a day-to-day basis. Forex markets are also highly affected by financial news releases which are relatively frequent and can bring about huge swings in the value of a currency. These fluctuations in price give traders opportunity to profit. Forex markets offer investors the ability to profit in both rising and falling markets. With a wide range of instruments to trade and highly leveraged trading, it is possible to begin trading Forex with a very small account.

Most of the instruments traded on the Forex market have a minimum trade size, calculated on the base currency, a common minimum trade size is 100,000 units, for this reason the use of leverage is essential for traders. Many Forex brokers offer mini accounts, where traders are able to place trades with a minimum size of 10,000 units.
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The moving average is one of the most basic and popular technical analysis tools in foreign currency trading. Moving averages are used by Forex investors to confirm trends, identify new trends and spot trends about to reverse.

There are three types of moving averages: Simple, Weighted and Exponential.

In a simple moving average each price point over the specified period is given equal weight. The user must define whether the high, low or close is used, these price points are then added together and averaged. As each price point is added to the equation a line is formed and the oldest price point in the sample is dropped.

A weighted moving average gives more emphasis to recent data. Each price point is multiplied by a weighting factor which will change every day. These figures are then added and divided by the total of the weighting factors. The weighted moving average provides smoothing to a curve of prices while being more responsive to recent price movements.
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Learning about the common mistakes made in foreign currency trading will help you to improve your skills and chances of being successful. Here are some common mistakes and assumptions new traders make:

- Misplacing Stops
Stops are necessary to avoid bad losses, however poorly placed stops can be just as bad. Before placing a trade the trader should consider the risk to reward ratio for the trade. The stop needs to be set with the traders money management in mind and should not be too close or too far away from the price. Traders should also consider moving their stop as the trade goes in their favor to lock in profits and reduce potential losses.

- Abusing Leverage
With Forex brokers offering up to 400:1 leverage, it’s easy for inexperienced traders to get carried away with the hope of making quick profits. When traders use a high level of leverage the returns can be astounding, but when the trade doesn’t work out the result can be catastrophic. Traders should always calculate the dollar value of the risk they are taking for each trade and ensure that this is appropriate for their account balance. Experienced traders rarely risk more than 2-3% of their account balance on any one trade.
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