1.
The best advice on how to learn to trade profitably is to learn
from experts with proven track records. Many learning styles are
available to beginners at all levels: books, CDs, online courses,
group seminars, even one-on-one mentors who will come right your
home for a few days. We outline our Forex-Trader picks in Learning
Forex Trading. Learning to trade from experts is worth every penny
and has saved us untold thousands in mistakes.We would not recommend
starting forex trading without any training. It is not hard to learn,
nor difficult to trade successfully, but you must first provide
yourself with a basic functioning knowledge of 'the game you're
in'.
2.
While you are learning you will need charting software to practice
reading the Market. Charting is an indispensable tool that shows
you in real-time data what the market is doing moment by moment
and also what the market has done in the past. As you learn to analyze
these charts you can determine what trades to enter and exit, where
to set your stop losses, limits etc. There are several good charting
software services that you can subscribe to online monthly. See
our Forex-Trader tested Charting Software picks in Tools of The
Trade.
3.
Then, to perform your actual trades online you need a real-time
'trading platform' to execute your 'buys' and 'sells' directly in
the Foreign Currency Market. You obtain a trading platform from
a Forex Clearinghouse that is connected real-time to the interbank
market. There are many good Clearinghouses (also confusingly called
Brokerage Firms, Market Makers, etc.) that provide you with the
trading platform to trade the funds in the account you have opened
with them. Before you begin trading your 'real' money, while you
are learning, you will practice on your own 'demo account' with
play-money in it, which will be provided to you by the clearinghouse
you plan to trade through. The contractual relationship you enter
into with your Clearinghouse is a very important one because
the Clearinghouse you choose determines many trading features and
financial advantages to you both as a trader and as an investor.
Forex-Trader tested Clearinghouses are reviewed in Tools of The
Trade.
We
have outlined a Getting Started path with uncomplicated steps. This
is the path that we would take if we were beginning trading over
again today with 'what we know now'. The
products and services we mention in these steps are all ones that
we have personally used for some time with consistent success.
As always you are free to forge your own path, and if you do, happy
hiking. There is a mountain of products
and services try out, and if you find ones you like better we would
love to compare notes with you.
To
trade successfully you also must have good charting software and
instantaneous data feeds critical to helping you analysis and interpret
the movement of currencies moment to moment so you know when/why
to buy or sell -- this you subscribe to monthly. You can get a 2
week or more demo to familiarize yourself with one that has the
features you like. The costs also vary, and some companies require
a year commitment. There are some free charting services offered
through the clearinghouses, but they tend to lack the tools to be
truly useful. There are also some costly proprietary Specialty Software
charting 'hybrids' which are market forecasters tools that look
more like video games than charts.
Explain
More About How Clearinghouses Work
A
good clearinghouse (i.e.. your computer access/link to the live
Forex Exchange Market) is the partner with which you trade the money
you have deposited with them in your trading account. After trying
and demo-ing many we have found a small handful that are truly excellent
for the beginner (and continue to be excellent as you grow) -- meaning
user friendly, legally accountable to regulatory bodies, and offering
fair costs (spreads) for their services/trading software platforms.
There still are many worrisome ones practicing in this closing era
of unregulated forex trading (new Commodities laws are imminent).
The
topic of matching the right clearinghouse for your needs is discussed
more in Tools of the Trade, because it depends on a number of factors
-- how much you can open an account with, how much the clearinghouse
profit spread, what your liquidity needs are, your minimum/maximum
stop loss and margin requirements, even where you live and how much
time you have to give to trading in a 24 hr. day.
How
Much Does it Cost to Begin to Trade? Learning to trade will entail the cost of books and whatever
traiining method you choose. It will also include a reliable computer
with a minimum 128 Mb of memory to run the charting software and
trading platform. Ongoing 'costs of operation' include the monthly
costs of high-speed internet, charting software, the email forecasting
subscriptions -- plan on spending $150./mo. up for ongoing costs.
What
about Pooled Clearinghouse Accounts to Trade with More Leverage?
We strongly do not recommend pooled accounts in any circumstance.
Perhaps you are considering self-trading a pooled- together family
account because it would give you a perceived advantage of more
leveraged funds to trade (50:1 up to 100:1 leverage) -- any risks
of loss represent a potential risk to family relationships, and
for this reason alone we do not recommend aggregating with family
or friends.
However much worse are the too-numerous negative experiences of
people allowing their investment funds to leave their control to
become part of a 'managed' pooled account. Not only is it a very
risky investment idea, it is illegal for anyone to 'pool' accounts
without compliance with SEC (a USA Securities Exchange Commission)
or international equivalent license. Never relinquish direct control
over your money/trading account to anyone (i.e.. the ability to
make withdrawals, deposits etc. directly by your own authority into
your own account).
A
good fund manager, if you do choose to go the (legitimate) Managed
Account route rather than the Self-Trader route, will make certain
you have your own 'segregated account' in your own name in a bank
or brokerage firm. These individual segregated accounts can still
be traded together as though they were in a single account by a
designated trader as long as the clearing house uses a trading platform
that allows it. You, as the investor/account holder, have direct
access online to your account activity at all times, and direct
control over your own account in your own name (just like a bank
account). The importance of this, for the safety of your funds,
cannot be over emphasized.
Thank you for inviting people to learn from your experience.
I found that to be very generous. I was hoping you may be able to
shed little light on just how to go about finding the right currency
pairs to buy.
This
is where charting software will make it self-evident for you to
know what pairs are 'trending'. Technical analysis using charting
software: Elliott Wave, Retracements, Fibronacci patterns, short
term trending, etc. Good charting software is invaluable! Look at
it as one of your 'costs of doing business'.
I
have just begun learning how the FOREX works. There are so few opportunities
for the lower economic class to achieve financial independence.
It took us a full year to learn to trade forex to achieve consistent
profits, but well worth the time and effort. Forex trading can be
the great leveler of the self-investor playing field. I and we believe
that with dedication to sound, risk-management trading methods you
can succeed.
I'm trying to build a financial base, but I just can't find a
door in. Is it possible for me to participate directly in the FOREX
with smaller amounts - like $1000?
Beginning
with $1K. is more of a challenge and more of a risk (but not impossible).
$1K represents 1 lot in Forex Trading, and that is the minimum (leveraged)
trade that can be made. Perhaps that $1K would be better spent on
trading education?
I
have participated in Forex 'Games' and other types of online investments
that claim to be investing in Foreign Currency (among other things),
with returns of 50% a month and more. I actually did get paid. Opinions
please?
We
strongly urge you to resist any further temptation to send your
money away to an investment-type pool (by this we mean do not send
your money away to be under someone else's control and in someone
else's account). It is unjustified risk, there are much better ways
to begin to experience profits from forex trading. Many such online
investments have totally disappeared into the Internet ethers from
which they came. Typically these investments give no contact information,
claiming to be 'offshore', 'for privacy reasons'. They last a few
months, their bulletin boards or email newsletters extoll their
climbing numbers of 'members' and pay-outs, then without warning
their site goes off-line forever. And you never knew who they were
that disappeared with your trust and your money or e-gold.
How do you forecast which currency is next in line to increase?
It
is not so much that you want to know when any one currency is going
up. You can make profits whether a currency is going up (buy), or
down (sell). All Currencies are continually rising and falling relative
to other currencies, and forex trading is in fact trading one currency
relative to another. Good trading opportunities are always present
when you know how to recognize them. Technical analysis using charting
software, market sentiment, experience will show you which currencies
to pair to trade. Forex Trading is a skill of identifying (and acting
on) the probabilities.
How
do you choose when to rollover or close positions?
Technical analysis using charting software that (when you learn
how to identify what you are seeing) depicts resistance levels (how
high it will likely rise to) or support levels (how low it will
likely stop dropping at). This is helpful for determining whether
to rollover the trade for a bigger forecasted profit the next day.
However, a rollover does have additional clearinghouse fees attached.
Quick in-and-out trades are closed intentionally with the goal of
a smaller profit gain (such as a 4 pip profit).
For example, Beginners, who are learning to read their charts, can
do very well closing positions at whatever point they have gained
+4 pips profit. This represents a $40. profit (in this example we
are trading 1 lot Euro/USD, so 1 pip equals $10.). A $40./4 pip
gain is a relatively small move on the chart and may not seem impressive
until you consider that If you do this successfully 4 times a day
you have made $160. profit. With 4 such daily trades in a four day
trading week you will have made $640. (consider also that this is
even without the magic of compounding). We leave the monthly and
yearly calculations to you.
What
indicators do you utilize?
We have tried everything we could ever get our hands on. Over time
we have selected the ones that are most consistent and well suited
to our trading style. See our review of different indicator tools
in Tools of the Trade. You will develop your own trading style (best
times of day, favorite currency pairs, best instinctual moving-average
chart pattern etc.). But experience with basic technical analysis
using charting software is always the starting point. Then you add
forex forecasting email subscriptions, Allan Greenspan's body language
(no kidding) etc.
Are there any real time & reliable direct (commission free) market
maker entry sites online?
Yes.
It is not necessary to pay a clearinghouse (also known as a market
maker, or forex brokerage house) an additional 'commission' for
self-trading using their platform/services. They are usually compensated
in the 'spread' between the buy price and sell price.
