subject: Starting in Forex [print this page] Starting in Forex Starting in Forex
There are any number of stories around about how people have made a fortune trading in foreign exchange markets. Maybe you have thought about joining them. Perhaps you've already dipped a toe into the foreign exchange pool, but have caught a cold and lost money. Or perhaps you would just like to know a little bit more about the Forex phenomenon. Whatever the reason, this article will help you gain a better understanding of this overhyped trading activity.
There's no getting away from the fact that if you want to be a successful trader you have to undertake significant amount of research, read a great deal and practice. Unfortunately, the vast majority of newcomers to the foreign exchange market lose their capital in a relatively short period of time. So before risking your hard earned cash you must be sure that you have a thorough knowledge of the basics. Like so many technical activities there was a great deal of jargon involved in foreign exchange trading and you not only need to recognise the language, you need to actually understand the meaning behind the terminology. You will hear phrases such as trading pairs, stop losses, pips, candlestick charts, double tops and triple bottoms. It can be confusing at first and so you need to understand that to become proficient in Forex trading is going to take time, effort and discipline. It can be a fascinating journey but you have to be prepared to commit to this educational process. It all sounds a bit too much like hard work then you're going to have to try some other means of supplementing income. It is absolutely essential that you learn the basics before starting to actually trade. Sadly a great many people fail to dedicate sufficient time to the learning process and end up losing their capital and becoming very disillusioned in a very short period. Whatever you may have heard from the so-called "gurus" there are no shortcuts and foreign exchange trading is not a magical get rich quick scheme.
There is no way that you could sit down at the piano for the first time and play a concerto or striker golf or like Tiger Woods the first time you pick up a club. Concert pianists and professional golfers become experts because, having learnt the basics, continue learning and constantly practice until they achieve the requisite standard. It's much the same with foreign exchange trading, but you'll be relieved to know that you can become proficient in a much shorter time. On the other hand, practising your golf swing might take up your time but doesn't actually involve a significant amount of money, but Forex trading demands that you back your judgement with your capital. If you jump straight into a trading account the chances are that you're going to lose your capital before you become proficient enough to start placing winning trades. Fortunately, there is a simple answer to this conundrum in the form of the demo account.
Most people will be trading foreign exchange through a spread betting account and virtually all of the spread betting companies offer a demo or practice account. One of the longest established red betting companies is IG index.co.uk and having used in some years we have no hesitation in recommending them. Nevertheless there are plenty of companies available and you should check a number of sites on the Internet to find one that appeals to you. We cannot emphasise strongly enough the need to open a demo account so that you can learn the basics and practice your techniques and strategies without risking any money. If you don't take this initial first step you are guaranteed to lose. Don't say we didn't warn you.
With the demo accounts you can experiment with different techniques and trading systems until you find a strategy that suit your particular style. Keep practising until you're completely comfortable with all aspects of trading and with the software and trading program used by your spread betting provider. During this period you will also learn how buy and sell spreads change as a result of international news stories, alterations to interest rates and the release of economic data. So please make sure that you use a demo account until you feel completely comfortable with all aspects of the trading activity and do not be tempted to start trading to soon.
Unfortunately there is a downside to the practice account insofar as you can be lulled into a false sense of security. With your demo account you are only using 'play' money and may therefore be tempted to take greater risks than you would be if you were using your own cash. Many new traders have found that there strategy works extremely successfully when using a demo account but sadly fails miserably as soon as they start trading in the real world. Even when you feel completely comfortable trading on your demo account he must start your life trading slowly and carefully. The content with small gains and be thankful that your inevitable losses are equally small.
Experts in all walks of life never stop learning and foreign exchange traders on a different. A quick look at Amazon will show you that there are literally hundreds of books available on all aspects of foreign exchange trading as well as related disciplines such as technical analysis and general trading strategies. Read as much as you can, maybe subscribe to video learning program and, if the opportunity arises, take advantage of seminars arranged by the spread betting companies. All of the better spread betting companies have a tutorial system that is available on their website and you should take advantage of this facility.
Once you started your trading activity it's a good idea to open the second demo account with another spread betting company. This will enable you to practice any new techniques that you pick up from your research before trying them out on your life account. It's a good idea to have a relationship with two separate companies so that you are never locked out of your account as a result of the systems failure. You should also ensure that you can trade over the telephone so that you don't find yourself locked into a trade if your own computer decides to crash at a critical time. Serious traders will also have a laptop as a backup facility in case their PC stops functioning or they have a problem with their broadband connection.
There's no getting away from the fact that it's going to take hard work, a great deal of practice and many hours of study before you can expect to become a competent trader. Foreign exchange trading is exciting, demanding and can be extremely rewarding in a monetary sense, but it's not going to happen overnight and, as we have said before, it's not a get rich quick scheme.
If you have the sort of personality that can't bear losing, then and foreign exchange trading is probably not for you because losing trades are an inevitability. The trick is to make sure that you have more winning trades than losing trades. So don't be afraid of losing trades and simply treat them as an educational event, learn from them and move on.
