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What is Forex ?
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The Foreign Exchange market, also referred to as the "Forex" or "FX" market, is
the largest financial market in the world, with a daily average turnover of
approximately US$1.5 trillion. Foreign Exchange is the simultaneous buying of
one currency and selling of another. The world’s currencies are on a floating
exchange rate and are always traded in pairs, for example Euro/Dollar or
Dollar/Yen.
Questions From Email Inbox
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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.
Learn Forex
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How do I begin? Please give it to me SIMPLY.
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.
Explain More About Charting Services
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.
WAIT US FOR THE COMING LESSONS