It takes time to learn to be a successful forex trader but you can cut corners if you have a good introductory program that covers everything you need to know. This includes:
- understanding the principles of currency trading including managing your account, trading margins, and allowing for the cost of the spread
- technical analysis: discovering how to recognize trends in the markets, the different types of charts and how to interpret them so that you can profit from market movements
- fundamental analysis: understanding what to do in the face of major national or international economic events that are likely to impact on currency values.
- finding out how to minimize your risk and protect your trades with stops
- developing the power to apply your system without allowing losses or emotions such as fear to throw you off balance and affect your chances of earning long term profits
A good place to pick up hints and tips can be a forex trading online forum. There are many of these on the internet and members will comment about all kinds of issues relating to the market and their own trading. This can be a great place to go if you have questions.
However, forums have some drawbacks. One is that the advice you get may be very contradictory. There is more than one way to trade forex profitably and it can be confusing to be receiving advice from several different people, each with their own approach. It is usually better to stick to your own system.
The other problem with taking advice on forums is that you do not usually know anything about the people who are posting. Somebody could sound very knowledgeable and then it turns out they have only ever used a demo account and never made a real trade in their lives. Some people spend more time hanging out in forums than trading. Just because somebody is very active in a forum does not mean he or she is an expert.
So do not rely on forums, free guides or untested theories for your trading system. When you are starting out in forex trading you need a solid grounding in the basics and a system that is easy to follow and actually works. As with most things in life you usually have to pay for the best. So look for a foreign exchange tutorial that is part of a profitable forex system.
Beginner Forex Currency Trading: What Is It All About?
For a beginner forex currency trading may seem to be a whole new world but in fact the basics are quite easy to learn. You just need to understand the buzz words and trading terms and grasp a basic understanding of how the markets work.
Making big money in a short time is what forex currency trading is all about! It is possible for investors to make a lot of money very fast because the rates of exchange on the foreign market can rise and fall quickly. This means of course that it is risky and there is also a chance of losing a lot, just like most things in life that have the potential of big returns.
As you will know if you have ever exchanged currency for a vacation, the rates are constantly changing. For example you may change $100 into another currency planning to travel, and then find that you do not need it and change it back. The rate will probably have changed in the meantime and you may even have made a profit.
Forex traders deal in currencies hoping to make a profit all of the time, but instead of changing money at the bank they use a broker. Most transactions these days are handled online. In many ways it is not so different from stock trading. There is the same potential to trade in margins where a small balance held by your broker can control much larger deals.
One difference from stock exchange trading is that forex traders are not limited to dealing in their own country. You can trade any two currencies regardless of where you live. This also means that the market is international. Because of time zone differences, it is open 24 hours a day from Monday morning in Australia to Friday afternoon in New York.
Each currency is represented by 3 letters: USD for the US dollar, GBP for the British pound, EUR for the Euro, JPY for the Japanese Yen, CHF for the Swiss franc, CAD for the Canadian dollar, AUD for the Australian dollar etc. The exchange rate between two currencies may be expressed like this: USD/CHF 1.14. This means that to buy one US dollar you will need 1.14 Swiss francs.
If you want to start out in forex trading you will need to look for a broker or investment management company that you trust. It is worth shopping around and checking online forums for recommendations. Check out how long the company has been in business and what your rights and liabilities will be. Read all of the fine print.
You will probably also want to use a bot to do your trading for you. This is automated forex trading software that can trade 24 hours a day according to rules that you set for it. There is usually a demo option so that you can test out the whole system for a while before you let it trade with real money. There are many forex robots on the market and most of them come with full instructions for beginner forex currency trading. We recommend "The Forex Megadroid" and you can see a complete review of this software here.
Currency Trading: An Introduction
Forex, foreign exchange and fx trading are all different names for currency trading, where one currency is exchanged for another in the hope of making money when the exchange rates change. These rates are constantly changing due to market news, national events or a knock on effect from changes in the stock exchange.
At the most basic level, imagine you exchanged some US dollars for British pounds. You might give $100 to buy £65. Then the rate changes in your favor so you exchange them back again. Now with the new rate you get $102 for your £65. You just made $2 or 2% of your investment.
Currency traders do this kind of thing all of the time with the aim of increasing their funds through many small trades. They trade on margins so that they can control larger amounts with only a small investment. In the above example, you might only have to hold $10 in your brokerage account to make the purchase even though the amount is $100. The broker covers the rest on the assumption that the market is unlikely to change by more than 10% in a short time.
Forex trading has been around for over 30 years but until the rise of the internet it was almost entirely in the hands of banks and other institutions with large investment funds. These days ordinary people can get involved on their home computers although the financial institutions are still the major players. When I tell you that around US $4 trillion changes hands every day on the currency trading markets you will understand that only a small part of this belongs to ordinary people like you and me.
Foreign exchange is a worldwide market and because of the different time zones around the world you can trade almost any time. Sydney, Australia is the first currency exchange market to open each day, and by the end of the business day in New York the Sydney market is open again for the next day's trading. So for 5 days per week this is truly a 24 hour market. It only closes on weekends.
You are not limited to dealing in your own country's currency so if your national economy is in a very unpredictable state you can switch to trading two other currencies that are a little more stable. While it is true that a volatile situation with big fluctuations can give you big profits in a short time, it is extremely risky to get involved in a currency that is experiencing a crisis.
These days brokers are going all out to attract the new type of home investor who does not have a lot of capital, so you can get started with just a few hundred dollars. They will provide you with software that allows you to make trades on your account, and real time market information including charts to show you the direction of movement of the different currency pairs.
With so much money changing hands every day, foreign exchange is a high liquidity market. This means that your capital will not be tied up for the long term as it might be if you bought certain kinds of stocks.
Apart from some funds to invest, the main things that you need to get started with currency trading are good money management skills, self discipline, a profitable system to follow and perhaps a forex robot to apply your system for you. When you have these in place, currency trading can be fun and quite profitable.
How To Find A Forex Trading Broker
One essential that you must have when beginning currency exchange trading is an account with a forex trading broker. The broker is your link into the markets and will cover you to trade margins.
But how do you go about selecting a good one? Here are 5 points to take into account when you are shopping around for forex brokerage accounts.
1. Reliability
This operates on several levels. Firstly, of course, you want a broker that you can trust, who will not suddenly disappear from the internet along with all of your money. The forex market is broadly speaking unregulated, so there are a huge number of brokers and some are more trustworthy than others.
Your first step is to check that the broker is regulated. In the USA this means that you want a broker who is registered with the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). Look for a forex broker with a clean record in any complaints logged against them on the NFA site. Other countries have their own regulatory bodies.
Then you need to think about whether the broker's platform is reliable. This is their software that you will connect with whenever you want to trade. If it is often offline, it is likely to cause problems for you. You could miss out on either opening or closing a trade at the best time. Check forex trading forums for feedback from users on this point, although be careful not to be swayed either way by a single individual who may have his own reasons for being strongly for or against a particular broker.
2. Services
The forex markets are open 24 hours from Sunday night to Friday afternoon EST. Check that your broker's trading platform is available all of this time (most are) and that they offer 24 hour customer support on trading days too.
Check that they cover at least the seven major currencies USD, AUD, CAD, GBP, EUR, CHF, JPY. Again most will, but it is worth being sure.
A broker should offer you charts, technical analysis, and instant execution of your orders at the displayed price.
3. Costs
Forex brokers do not charge commission but make their money from the spread, which is the difference between the buy and sell prices on any currency pair. Spread can be anything from 1 pip or less, up to about 3 pips, depending on the broker and the pair.
The size of the slice taken by the spread can make the difference between profit and loss in your trading account in the long term so look closely at this. If you know which pairs you are likely to trade most often, the spread on those pairs will be more important to you than others. At the same time, do not be drawn in by a special offer that may not last long once you have committed your funds.
You also need to consider how much is the minimum that you can invest. Most new traders are best advised to start small, so look for a broker who will let you open an account with $250 or less.
4. Margins
Margin requirements can vary a great deal from broker to broker. A lower margin requirement means higher leverage, and higher leverage gives you greater profits or losses on the same fund size. So low margins seem great when you are doing well, but losses will be bigger if things go badly.
5. Lot size
Lot size can vary from one broker to another. Generally 100,000 units of currency is a standard lot, 10,000 is a mini lot, and 1,000 is a micro lot. Some brokers offer fractional lots which give you more power to set your own lot size. This could be a bonus or just an added complication.
There are other considerations including the interest paid on your margin account, rollover charges and other policies. However, these are the main points that you should be looking out for when choosing a forex trading broker.
Quick & Easy Forex Trading
This is absolutely the best book you can get to help you start Forex Trading right away!
This ebook makes it really simple to:
- understand the terms used in the forex market, like pips, pairs and spread
- follow through an example trade and see exactly how to calculate your profits in different currencies
- see how to use several types of charts and indicators to predict future movements of the market (that's how you make money!)
- know how to choose a good broker (one of the most important sections)
- understand the different types of accounts and be able to pick out the best one for you
- start trading and making money for yourself
Click the link below to learn more about the right way to trade forex and how to start making money now in this exciting new ebook on Forex Trading!
Click Here For More Information On
Quick & Easy Forex Trading
Forex Trading Fortunes Are Waiting!
