Leverage is the ability to trade with borrowed money and is commonly used in currency trading. Although leverage increases the potential profits, it also increases the potential for loss. For example, if trading one lot (100,000 units) of currency only requires $1000 as a deposit, then theoretically a trader with $5000 in his account would be able to trade 5 lots of that currency. Just because it's possible, though, doesn’t mean doing it is sound trading practice. Rather than looking at this trade as $1000, it's far more sensible to treat it as the $100,000 that is actually being moved. Improper use of leverage will force you into making trades at less than preferable rates. To avoid this situation, try not to use more than 10% of your account at any one time.
Actually performing a trade with software might be simple, but the process of determining how much of which currency to trade and when to trade it can easily become a full-time job. In order to make accurate judgements, traders must understand the essentials of both technical and fundamental market analysis.
Technical Analysis
Most small-time investors use technical analysis to guide their trading decisions. This type of analysis is concerned with how prices move, rather than why prices move, and operates on the idea that prices move in predictable, repeating trends. Technical analysis is used to identify patterns of market behavior that are expected to produce certain results. These patterns are charted on bar charts and candlestick charts.
Fundamental analysis
Fundamental analysis tracks the economic and political environment in a country in attempt to predict how that country’s currency will move. Fundamental analysis is used primarily for long-term investments. While fundamental analysis may provide an excellent perspective on possible future trends, it can be extremely time-consuming and often produces contradictory results.