The beauty of forex is you can get started right away without any money and without having any idea what you are doing. To do this you open what is called a demo forex account. In your demo account you trade with fake money and you have fun learning how to trade for real. Your goal is to build a sustainable track record of successfully trading with fake money. Once you have done this you will be ready to try trading with real money.
The transition from fake money to real money can be tricky. Sort of like learning to fly in a flight simulator and then flying a real airplane for the first time. Each time you enter the flight simulator your skills will be improving and your confidence increasing, until you get to the point you feel you are ready for the real thing. In theory, if you master the flight simulator, the real airplane will not be a problem.
In reality, as you're walking toward that real airplane for the first time, your heart will be pumping and you will be scared. Likewise when you are about to pull the trigger on your first real money trade your heart will be pumping and you will be scared.
Flying a plane for real and trading forex for real are similar in many ways:
If you are reckless flying the plane you will get yourself killed. If you are reckless trading forex you will lose all your money
Flying entails taking off, obeying the rules of safe flying, and landing safely. Forex trading entails entering a trade, controlling your risk, and exiting safely.
When flying an airplane your success requires you get all three (takeoff, safety, and landing) right. In forex trading your success requires that you get all three (entry, risk, and exit) right
The best pilots always put safety first. The best forex traders always put safety first.
Flying a plane and trading forex for real are different in one key way
To become a pilot there is government mandated formal education and professional training requirements; as a result of this formal education and professional training, few pilots crash and burn. To become a real money forex trader there is no government mandated formal education and no professional training requirements; as a result, almost all forex traders crash and burn
Formal education and professional training
Whether you want to be a jet fighter pilot or a weekend recreational pilot of a two-seater, you need formal education and professional training to insure your safety and success. If you want to become a full-time forex trader, a part-time forex trader, or just dabble from time to time you need at least some education and training to insure your safety and success; especially if you're serious about making money from forex trading.
Education choices - getting started
I suggest you start withBabyPips.com; it's described as “a free, funny, and easy-to-understand guide for teaching beginners how to trade the forex market”. Here you will learn about the forex market, forex trading, technical analysis, and fundamental analysis. There is also practical advice on choosing a forex broker and how to go about opening your broker account and getting started with your forex trading. If you prefer reading a book, “Forex for Dummies” is a good place to start. Brian Dolan, one of the authors, is a brilliant guy and he has done an excellent job in laying out the forex basics in easy to understand language. I wrote an article “Forty five ways not to lose money trading forex”, which can easily be located with a Google search; many traders have told me it helped them a lot. You may want to read that one; knowing the common mistakes new forex traders make may be helpful.
As you study the basics, you will likely find the technical tools that you think will suit you. It's a good idea to do further research on those technical tools; three excellent free sources of further information on technicals (and fundamentals) are Investopedia.com, fxstreet.com, and forexfactory.com
Your broker will supply free charting software for you. Personally, I like netdania.com charts; they are very user friendly and there is a free demo version, which I have been happily using for the past 5 years.
Technical tools I use
I love trading. I was a professional forex bank trader for 20 years. I retired in 2004 and have been trading my own account since then. I like to trade everything from one minute charts to daily charts. The technical tools I like best are:
Simple moving averages
Daily high and low
There is plenty of free information about all of these technical tool available on the internet
Fundamental tools I use
Market view - what currencies are traders focusing on and why
Central bank speak - what are the key moneymen in each country saying and why
Interest rates - how much interest you get for holding onto a currency matters
Economic news - the reality of employment, retail sales, and housing matters
A good free website to track all the upcoming important scheduled economic news is forexfactory.com. Kathy Lien is excellent at the fundamentals. Her daily comments can be found at fx360.com.
Where do you begin?
Of course, if you are a new forex trader it takes time to figure out your niche and if you have a job you will need to choose a particular focus of your forex trading. I still think it helps to at least get some exposure to all the tools, both technical and fundamental, that work best in forex trading, and then choose the ones you like. There is plenty of free information on the internet to choose from.
Consider formal education and training
Once you've done your independent study you may choose to try trading forex on your own. If you have the available resources, it may be a good idea to get specialized training / mentoring; there are some good ones out there.
The argument that if a trader was any
good he would not be teaching is not without merit. However, there is
this to consider. A good trader manages risk effectively. Trading has
its ups and downs but getting paid to teach trading is a winning
trade every time. Why not do both and improve the slope and the
volatility of the earnings curve.
That is not to say there are not a lot of disreputable forex educators out there. Do your due diligence and you can find a good one.
By Jimmy Young.Source: "ActionFore".
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