Getting started in trading


ca. 2002 — Wall Street Sign — Image by © Matthias Kulka/zefa/Corbis

Forex trading is becoming so popular that thousands of new traders are getting involved with the market each year.  It is possible to make a full-time living with Forex trading, but most people do it as a secondary investment to their primary source of income.

One term you may have heard about when dealing with Forex is the Forex Spread.  The difference between the bid for selling the currency, as opposed to the offer or the purchasing of the currency, is known as the spread.  You may also have heard of this being referred to as the Bid Offer Spread.  Spread policies are very different when you start looking at various brokers.  Usually the policies are very difficult to comprehend.  You may find your broker offers a fixed spread which remains the same regardless of the market.  These spreads are usually higher than your average variables spread and during most of the trading day you are paying insurance for protection from the short term volatility.  Make sure you read up on any of the information that your brokerage gives you, especially about spreads.

Develop a Forex trading strategy.  Forex trading is not an investment vehicle that you want to get involved in without a goal and a strategy on how to reach that goal.  There are many different Forex trading strategies that have been created and the best thing to do is to educate you on as much as possible about trading strategies.  It is best when studying various trading strategies not to just dismiss a strategy because some of its circumstances do not pertain to you.  Instead it is best to figure out why that strategy works, albeit for those who have the money to work a strategy that would be out of your budget.  Analyzing strategies is going to be the most successful way for you to find the best one that works for you.  There are small cap strategies and there are large cap strategies.  If you are a small cap Forex trader you will want a know the large cap strategies for the future when you have that kind of capital.

Work with a well-established broker.  You want someone that has years of experience in the market.  If you constantly do the wrong things in Forex trading you’re not going to survive as a broker.  There is less fraud in Forex trading, so long term brokerages are more likely to give you good advice and keep your money in safe trades.

Technical and fundamental

You are going to need to learn technical and fundamental techniques in Forex trading.  You will need to choose between one of these techniques in order to work out a strategy for your Forex profits.  Once you choose this technique, educate yourself as much as possible about everything that the experts have said about this technique.  Create your strategy from this and then work your strategy to the letter.

Open up a practice account then start educating yourself about trading by making practice trades.  They usually give you a large amount of capital so you can really play around. Have fun with it and make it a game to learn from your mistakes, and don’t forget notes.  In fact keeping a Forex journal is a great way of learning the market.  At first it might seem that there is so much information that you won’t be able to do it.  Play with a practice account and learn.  If you don’t put real capital into the market for six months to a year, you will probably be saving yourself money as it would be much better to make those mistakes on practice accounts rather than on your bank account.