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What a beginner should know about forex trading

A newcomer to forex trading could get easily confused navigating the plethora of information available on the Internet and elsewhere. All you got to do is just type in the right set of key words onto a good search engine, and within a few seconds you get all the information that you need know about forex trading. The real problem lies in collecting and filtering this information to suit your needs. Otherwise you could well be leading yourself the wrong way.

Invest in books on forex trading

It would indeed be a good move to invest in books on forex trading. A key point to remember is that, some of the reputed forex manuals and guides are not available in cyberspace, and so it would be a good idea to invest in those books as they are surely priceless in terms of the history of the forex marketplace and narrative of future trading strategies. The nuggets of information in forex books indeed could help you get great returns in your forex trading.

Continue gathering knowledge on forex trading

A beginner in forex trading should never stop learning about forex trading no matter how proficient he or she feels about it. In other words, always try to keep yourself updated on issues concerning forex trading. The value of a particular currency is often dependent on natural disasters and politico economic issues in the country of that currency, apart from other factors. So make it a point to read all the pages of the mainline newspapers everyday. For example, if you were planning to trade in the Pound or Euro, make it a point to read the major newspapers in Britain and the Eurozone countries. You can do so by accessing the online editions of those newspapers.

Over a period of time, you will be able to decipher the subtle variations in the value of the currencies and correlate them with newspaper reports on major events. The forex landscape changes everyday, perhaps every minute. That is why it is important to keep abreast of these changes by reading major newspapers.

Sometimes you read newspapers and tend to forget what you have read especially if the newspapers are those that are published in foreign countries. For example, if you are an American and you read British and Eurozone newspapers there is every possibility you could forget what you had read, as the events reported don’t concern your immediate neighborhood. So always keep a note of what you have read. In course of time, you will be able to figure out which events are likely to affect currency price changes.

A beginner in forex trading should also be aware of a few other points. For example you would have to grasp quickly the dynamics of the currency market.

Learn the Principles of trading

How do you learn the principles of trading? Joining a forex training program is the easiest way to learn the fundamental principles of forex trading. That way you could avoid early losses, because you then have a tutor to guide you. Remember, currency markets are highly organized and only a good training program could help you to quickly grasp the essentials. For example, markets in the US and Japan could be affected from information coming out of Europe or elsewhere. In other words, there is a hidden synergy in forex markets whether it is the currency markets in Asia, Europe or North America. To quickly understand these elements of forex trading, joining a training course would be of great help to you.
A good forex training program could also impart you skills on opening a trade, reading forex charts and graphs, the mechanism of applying leverage, and other facets of forex trading. It is only after comprehending the basics should you attempt your first trade.

Trade on a 24/7 timeline

Remember, you could trade on a 24 hour basis each day of the week from Monday to Friday. As currency values are tied up with global economic news, and as also with political events, what happens in Japan or the Far East will have an impact on the markets when they open in London or New York. So you got to be prepared to trade any time of a particular day, correlating with events that happen in one part of the world with the functioning of forex markets elsewhere in the world. So if you ignore market events and place trades you could well loose.

Here are a few guidelines to the newbie trader with emphasis on the actual trading activity:

  1. Choose currency pairs involving U.S. dollar as it has the volume to produce the price fluctuations necessary for big profits and the liquidity to enter/exit positions fairly quickly.
  2. Find the currency pair through back testing that has the most pip movement and least volatility, so it could give you good profits. You could use basic technical analysis to help you on this.
  3. Once you determine the trends, immediately set stops and exit points. This affords you both safety and profits.
  4. Review your pertinent currency charts at least once every day, and refrain from overtrading.
  5. Take care to exit positions when necessary.

The most important secret to trading success on Forex markets is patience. No trading strategy is ever perfect, simply because forex markets are never predictable. At times your strategy might fail you. But the important point is to continuously back test your strategy by remaining patient all the while.

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1 Comment»

2010-01-10 04:54:09

[...] What a beginner should know about forex trading [...]

 
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