By Meno
Why would anyone trade foreign exchange? Well, to put it into perspective, the NYSE trades over 1 billion dollars a day in volume. In comparison, the foreign exchange market trades approximately 3 trillion dollars a day in volume. This means there are many more opportunities to make money in this market. But these rewards comes with great risk. You can loose some or all your money placed in this market. Fortunately, there are tools and strategies you can take to avoid/ minimize those pitfalls. This article is meant to point you in the right direction, and provide some insight to some of those tools.Instructions
Step 1
Know enough to survive! GET EDUCATED - This is by far the most absolutely important step. You need to know what the market is all about. What are currency pairs, pips, market makers, managing margins etc. These are terms you will hear bantered about and are absolutely important in understanding when to trade and when not to trade. However, you should feel rest assured that you will not have to know everything in order to place your first trade and make serious money. Below, under the resources section are links to some websites which beginners can use to get some education. These websites absolutely breaks it down in extremely simple (sometimes too simple) terms. They also offer advance tutorials for those of us who would like to sharpen our skills. There you can create your own username and meet the growing community of like minded traders who you can share ideas and ask questions. Best of all they are free.
Step 2
Practice makes perfect! OPEN A FREE PRACTICE ACCOUNT - Just as important as the first step, you should immediately open free a practice account. Everything is not going to come at you all at once, so the best way is to learn as you go. Therefore, you need to visualize what a pip is and see how spreads work on an account that actually follows the market movements, while not risking your own money. Usually, these providers allow you to trade, some fake money so you can test your strategies and realize "profits" and "losses." This way you will understand the risk involved. They also afford you the opportunity to upgrade your account by depositing nominal amounts into a real account (called mini and micro accounts). This has some positives and negatives. The positive is that some of these account requirements can be as low as $1. The draw back is you will never truly understand the gravity of your investment if your only risking one dollar. The average micro account usually starts at $200, that is even a bit low, but you will at least see what it means to gain on a lot or lose on a trade. Trust me, $200 is nothing to lose in this market. Again, below under the resources section are links to some sites where you can get a free practice account. There you can practice trading a micro account which starts at $100, once you have been through all the tutorials and feel comfortable with your trading strategy. Now, there are many companies out there offering practice accounts, but not all of them try to make the process easy by offering tutorials on trading and the like.
Step 3
You need a map in order to know where your going! GET CHARTING SOFTWARE: This is a very important step, but you can wait until you are familiarized with the inner workings of the market. The charting tools helps you to intelligently guage the market trends and plot your trading positions. This tool is essential, but I say wait, because the websites below actually provide free charting tools. Once you understand them, then you can probably consider purchasing more advanced charting tools. Why? Well, just take a look at the picture I used to represent this this step in this article. This is typical for the average Forex Trader. They are on top of their game and are not about to lose money because they did not invest a small amount of their earnings in the best charting technology. Of course small is relative, because charting tools can range from $0 - $10,000 or more. Additionally, there might be a monthly fee charged for the data feed. Believe me, this is a worthy investment. I actually own and use two charting softwares and accompanying data feeds. I am sure that there are others who use more than that. Now, there are tons of offers on the internet for charting tools ranging from the ridiculous to really good. The important thing to remember is, during your practice, you will have developed a trading style, so you should pick the tool that best fits your trading style. I am confident if you follow steps 1 and 2, you will find the right charting tool that best fits your trading style. Coupled with step three, you should be on your way to making lots of money. Happy trading!
Tips & Warnings
Don't be in a rush to learn everything at once, it will take some time.
Join forums and speak to others about what you are doing, see what they are doing so you can sharpen your trading knowledge / skills.
Don't get too greedy. Set daily targets and know when to walk away from your trades.
Don't expose too much of your margin, usually 5-10%.
Know when to let go of a losing position and keep a winning one.
Resources
Create a FREE FOREX Practice Account with market charting tools and tutorials!
Free Forex Charting Software
Free Forex Tutorials and Training
More Free Forex Tutorials and Training
Even More Free Forex Tutorials and Training
forex currency exchange
