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How To Get Started In FOREX Trading
The foreign exchange market (FOREX) offers many advantages to investors. But you need to know where to begin. This short guide will give you the FOREX basics, so you can quickly start participating in this fast growing market.
In the past, foreign exchange trading was limited to large players such as national banks and multi-national corporations. In the 1980�s the rules were changed to allow smaller investors to participate using margin accounts. Margin accounts are the reason why FOREX trading has become so popular. With a 100:1 margin account, you can control $100,000 with a $1,000 investment.
A Learning Curve
FOREX is not simple, though, so you�ll need some knowledge to make wise investment decisions. Although it is relatively easy to start trading on the FOREX, there are risks involved. Your first move as a beginner should be to find out as much as possible about the forex market before risking a dime.
Find A Forex Broker
FOREX traders usually require a broker to handle transactions. Most brokers are reputable and are associated with large financial institutions such as banks. A reputable broker will be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Open an Account with a forex borker
Opening a FOREX account is as simple as filling out a form and providing the necessary identification. The form includes a margin agreement which states that the broker may interfere with any trade deemed to be too risky. This is to protect the interests of the broker, since most trades are done using the broker�s money.
Once your account has been established, you can fund it and begin trading.
Many brokers offer a variety of accounts to suit the needs of individual investors. Mini accounts allow you to get involved in FOREX trading for as little as $250. Standard accounts may have a minimum deposit of $1000 to $2500, depending on the broker. The amount of leverage (how much borrowed money you can use) varies with account type. High leverage accounts give you more money to trade for a given investment.
Trades are commission-free, meaning that you can make many trades in one day without worrying about incurring high brokerage fees. Brokers make their money on the �spread�: the difference between bid and ask prices.
Paper Trading Forex Market
Beginning traders are strongly advised get accustomed to FOREX by doing "paper trades" for a period of time. Paper trades are practice transactions that don�t involve real capital. They allow you to see how the system works while learning how to use the various software tools provided by most FOREX brokers.
Most online brokers have demo accounts that allow you to make free paper trades for up to 30 days. Every new FOREX investor should use these demo accounts at least until they are consistently showing profits.
Each forex broker has its own set of software tools for making transactions, but there are a few tools that are common to all FOREX brokers. Real-time quotes, news feeds, technical analyses and charts, and profit-and-loss analyses are some of the features you can expect to see on most online brokers� web sites.
Almost every broker operates on the Internet. To access a broker�s online services you�ll need a reasonably modern computer, a fast Internet connection, and an up-to-date operating system. Once your account is set up, you can access it from any computer just by entering your account name and password. If for some reason you are unable get to a computer, most brokers will allow you to make trades over the phone.
There are lots of ways to make money. FOREX trading is just one more potential stream of income � if you are prepared to learn and practice.
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TREND TRADING: Accumulation and Distribution
Forex market like any other market works in a very simple way. It accumulates in a certain area for awhile, and once the accumulation is over, it advances to a certain distance until distribution starts, and accumulation happens again and advances to a certain distance again, and repeat and repeat. Day trading may not yield the best results while the accumulation and distribution work out itself, being double-murdered by zig-zag moves, while the market starts advancing out of accumulation area, day trading is a sure way of cutting profit short. In general, day trading is not the best form of yielding the most profits in my experience contrary to what some writers who never made real money in this game try to say. The safe and better way in making some money must be wait to for "accumulation" to be over and ride the whole length of advance until "distribution" starts and reverse as the market dictates as a short-term trade for 2-10 days, as the case may be.
Each Forex Trading cycle is different from the last one and that is the beauty of the market. It is extremely important to look at the big picture from the distance rather than studying the minute and hourly charts with a microscope. And repeat the whole show again and again ?til it shows the sign of turning in daily or weekly chart. And flip. Good trades to you.
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The concept of fair value in any currency is largely that of CBers and economists and not much about trading. Almost always currencies overshoot from the fair value areas some 20-30% in their medium-term trend and what makes all hard currencies range in reasonable areas overtime since we had this floating regime in 1971 must the ability of relevant CBs to control the currency ranges and their real economy's weakness or strength to support those ranges. ECB folks were not joking when they said Eur/usd was some 25% undervalued from the fair value when Eur/Usd was below parity levels two years ago. Same goes for BOJ when they were saying Yen was some 10-20% overvalued when it was trading around 100 some three years ago too. That is how these folks view the markets and try to guide the market. Of course, when US Treasury folks say "Dollar is still strong" when it is falling, they are begging the market to sell more dollars
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Global Forex Trading StoriesCarry Trades Will Continue to Suffer
Mon, 17 Mar 2008 21:47:19 -0400
USD/JPY fell to the lowest level since September 1995 and we expect the currency pair to continue to weaken.
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