Forex Trading Tips: How Forex Works

Discussion in 'Index Futures' started by ade4ade, Feb 15, 2012.

  1. ade4ade


    Here are some forex trading tips for beginners in the game. Forex trading is essentially a mind game, you play on a global stage. It is basically exchanging currencies and exploiting the currency volatility for profit.

    Foreign exchange trading or forex trading, is an interesting and profitable pursuit. If you strip the whole thing down to the bare essentials, it is just exchange of a pair of currencies, one at a time. The maxim that applies to all profitable transactions applies here too, 'buy cheap, sell dear'. Only the difference is that you do not buy or sell any goods in this trade. It's a barter system of currency, in which you exchange currency of a type for another with the intention of profiting from the transaction sooner or later. You buy a currency that you think will appreciate in value and you sell it when it does. Here 'buying a currency', means exchanging it for another type.

    To master foreign exchange trade, like any other subjects, you must find the best forex training program to master its fundamentals. The fundamental thing that you need to understand is how the exchange rates are affected by global market developments. When you focus on two currencies, that you are exchanging, you need to monitor the import-export trends between those two countries and the liquidity in both the markets. You also need to monitor the global effects on the two currencies. You have two options: either you can operate independently by opening your own trading account or you could operate through a broker. If you are a beginner in this field, here are some tips from acclaimed masters of foreign trade, put together for you :

    Beware of Cheats!
    Just like every financial field of endeavor, forex trading has its share of cheats and con artists who are out there to dupe honest people. Always be suspicious of forex brokerage companies that promise gargantuan profits with zero risk. They are surely con men, as every experienced forex trader will tell you, big profits always come, after big risks are taken. Also be wary of brokerage companies that promise investing your money in the interbank market as it's not very transparent in its dealings. Make a thorough background check and verify the registration of the trading company before you set up your account with them.

    Stay Connected with The Old Boys!
    If you want to be master of a trade, you have to learn from the masters. Get to know and stay in touch with experienced traders from the field. They have been there and done that. Learn from them as much as you can.

    Do Your Homework Well!
    Stay connected with the latest happenings in the forex market but don't get lost in data. Analyze and understand the cause and effect cycle in the forex market. Get an in depth knowledge of how the currency market is regulated and what factors affect its functioning. Understand why the numbers rise and fall and what causes exchange rate fluctuations. If you get your fundamental theory of forex trading right and stick to the basics, things will more often turn out right.

    Know Both Sides
    When you are trading between two currencies, study them well. That is, follow developments on both sides and not just the high value side.

    Too Many Cooks. . .You Know What!
    If you are giving your trading account over to a broker and he is going to operate for you, then let him! Let the man do his job, you may inquire, but do not meddle too much. If you are confident of trading alone, then make your own decisions after giving your ear to all.

    Think Long Term
    It's always the best policy to think long term when you are trading and it's also the mark of a good trader. Do not go for short term profits when your judgment tells you that things in long term will be better. Stick to your decisions and go for the kill, when you see a winner, and do not hesitate to sell out of a trade when you realize your mistake, out of stubbornness or hardheadedness.

    It's All About Timing!
    Remember that it's all about timing, when it comes to trading. New developments in the market always start after the morning news is out, as credit policy changes by central banks and world business news influences the choices of investors world over. It is advisable that you avoid trading off peak hours. You do not need to trade 24x5. Fix your amount of working hours and get used to handling stress.

    Keep it Simple and Be a Man!
    Keep your procedure simple and remember, you cannot control all the variables. So things are bound to go wrong in spite of all your preparation as the market is very fickle and driven by speculation. So be ready to brave the rough weather and steady your ship in the storm. Forex trading or any kind of business is not for the weak of heart!

    Hope these tips from the masters help you out in your forex trading career, and you too one day become one for further tips on how to make MEGA money on forex trading visit,