5 Steps to Learning Forex Trading Online

Learning forex trading online has opened up possibilities for many people. The foreign exchange, or Forex, currency markets used to be dominated by large banks and corporations, but the Internet has changed that, allowing regular people to supplement or replace their incomes by trading online.

It is very tempting to jump straight in, lured by the prospects of riches and perhaps "investing" in a $97 Forex robot which promises to do all the work for you. But to make it more than a failed effort, you need to understand the basics, and think for yourself.

1. Firstly, you need to understand what is happening when you trade Forex online. You have a large amount of "leverage" available which can help you profit, but which will devastate your account if you do not understand what you're doing. The Forex market is based around the idea of buying one currency with another, which means that you always deal with pairs of currencies, and never a single one. There are perhaps only six pairs of currencies which dominate the trading market, and to start with you would do best to concentrate on these.

2. When you look at the prices, you will see there is a "bid" and an "ask" price quoted which are not quite the same. The difference between them is called the "spread". One is the price that you can "buy" a currency at, and the other is the price you "sell" at. If you open the trade and close it immediately, then you don't get all your money back, but lose the spread, and that is how your Forex broker makes money for his work. You usually do not pay any separate commissions in Forex, which is unlike trading in the stock market.

3. Currencies are usually traded in "lots" of 100,000 currency units, though smaller lots have been made available by brokers to allow more people to take part in Forex trading. Your broker will usually allow a leverage of 100 to 1, which means you are staking 1000 currency units to trade a standard lot. You will need more than $1000, however, as the price can go up and down and the broker wants to know that you have sufficient funds to cover any losses. The exact amount required will depend on your broker, who will base it in part on your financial background and situation.

4. Now that you have an overall view of the market that you are intending to trade, you need to develop some strategies and trading plans so that you do not immediately lose your capital. Most traders spent some time studying technical analysis, which gives indications of the expected price movements based on historical information. When you are experienced, you can develop your trading strategies independently, but to start with you will probably adapt and use trading plans developed by others.

5. Finally, before risking any funds, you should test your trading ideas and get a feel for the way the market works by "paper trading" with a demo account, which involves imaginary money, and does not risk any of your resources. This also allows you to test out your strategies. Your online broker will usually provide this facility.

Once you have done all this work, and feel comfortable with the concept and mechanics of Forex trading, it is time to "go live" and start trading with real money. When you start you should concentrate on preserving your capital, and remember that you do not always have to be in a trade if there is nothing suitable.

Recommended books from


[CaRP] XML error: not well-formed (invalid token) at line 1 -

WORLD FOREX: Euro Lacks Direction As Market Digests Greek Deal - Wall Street ...
21 Feb 2012 at 11:38pm

«Market Leader» - news and previews making you rich.
WORLD FOREX: Euro Lacks Direction As Market Digests Greek Deal
Wall Street Journal
... (Dow Jones)--The euro remained range-bound during Asian trading Wednesday as caution over whether Greece can follow through with reforms after an ambitious EUR130 billion rescue deal prevented the common curren...
 
Liquidity of Currency Markets Brings Tighter Spreads for Forex Traders - SBWi...
21 Feb 2012 at 4:07am

Liquidity of Currency Markets Brings Tighter Spreads for Forex Traders
SBWire (press release)
High levels of liquidity in the forex markets make it possible for traders to afford tighter spreads on forex transactions, helping save traders money and reduce the ongoing costs of trading in highly leveraged foreign currency positions, according to ......
 
Xforex? Online Forex Trading System Announces Up to $2500 Bonus - PR Web (pre...
22 Feb 2012 at 2:04am

Xforex? Online Forex Trading System Announces Up to $2500 Bonus
PR Web (press release)
If anyone is new to forex then their "The Currency Trading Guide" e-book and one-on-one training sessions will prove really advantageous. Moreover, with $5000 practice account, a novice trader can easily learn forex trading before beginning to actually ...