Forex For The Absolute Newbie

 

FOREX FOR THE ABSOLUTE NEWBIE

Hello I am Jace and I will be introducing you to the Foreign Exchange Market further noted as the Forex. Forex trading is a great way to earn a living if you can discipline yourself enough to learn how to be a successful trader. There are four keys to being successful and not losing your shirt.

1.       Discipline

2.       Trading Strategy

3.       Accurate Analysis

4.       Money Management

We will cover each step but before we go into that let’s discuss the Forex itself. The Forex is the most highly liquid and most volatile market in the world billions of dollars are traded everyday in the Forex, dwarfing the stock exchange.  The Forex operates 24 hours a day 6 days a week. For the longest time the Forex was only available to investment bankers but has been changed to be available to everyone with an internet connection!

What you trade in the Foreign Exchange is currencies. Each currency comes in pairs such as the EUR/USD, GBP/USD and other exotics. Currency rates change extremely fast and that’s where the trader makes or breaks his bank. If news is released that Europe has a low unemployment rate, than its currency will increase in value against the USD in the EUR/USD pair.

There are three primary functions that you need to know when placing an order in the Forex, the first is buy when you buy a “lot” of currency than your hoping it rises against its counter pair, if you sell you are hoping the currency falls against its counter pair then finally there is close when you close an order you are paid market value for your currency, don’t get in a hurry and sell instead of close, I have done that myself.

When the Forex moves it moves in PIPs or Percent in Points. Each pip can be worth anywhere from one cent to $1,000,000.00 depending how many lots of the currency you buy or sell. For example I trade 50 lots on a mini account which makes my PIPs worth $50.00.

When you place a trade you are given a spread this spread is usually 4 pips so as you enter a trade you will already be down 4 pips this in essence is the brokerage fees. So the market hast to move 5 pips in your direction before you start seeing profit.

Alright that’s all for the crash course into Forex let’s get to the steps that I will cover briefly in this article and more in-depth in future articles.

1.       Discipline is the hardest thing for a trader to learn. Before you enter a trade you need to plan what you’re going to do and do what you plan, no matter what happens. This equates to how big your bank is, if you can stand to drawdown 25 pips then let your trade play out until it loses that much. But if you read my technical analysis articles you should not drawdown that low!

2.       Trading Strategy this directly relates to step number 1. Do what you plan! A trading strategy can be anything from if the currency moves up I will buy, if it moves down I will sell. I will provide a trading strategy in a later article.

3.       Accurate Analysis; Think of real-estate the triple L, location, location, location. Well the same thing happens in the Forex you want to position your trade in the best location possible based on your analysis. A more detailed guide to analysis will be provided, join the fan club.

4.       Money Management, I cannot stress this enough money management is the key to becoming a successful day trader. It boils down to how much money you have, how much you can risk and is the risk worth the reward you may reap. I will write an insane article on how to properly manage your account in a later article, again join the fan club.

I hope you enjoyed this short crash course of the Forex Market. I will be writing more detailed guides as time permits. Each guide will be very detailed include pictures and if I can figure it out maybe even some videos!