Learn Forex Trading

 Hi and welcome fellow trader,

This website has been built for people that are looking to learn forex trading as a starting point to expland or start their investment portfolio. Forex trading can be very rewarding financially but also has a great deal of risk due to the leveraged nature of the instrument that you are trading and it is important that you have a sound understanding before taking the plunge and making your first trade.

Or perhaps you have already made some trades in forex and are looking for answers as to why you lost all that money! Well, we'll have some of the answers here for you with various proven strategies, a complete mini-course to get you started and up-to-date information to ensure that you learn forex trading the correct way.

So one of the first questions may be: Why is the site www.foreandstocktrader.com if you are offering visitors how to learn forex trading? Well that is indeed a good question. Our background and success has been in forex trading but over the last 12 months we have seen that our forex strategies and those we trust can also be applied to many other markets, such as CFD's (Contracts for difference), Gold, Crude Oil and other commodities along with standard stock trades. Essentially we have expanded as our own success and knowledge has expanded and you through the webiste, reviews, guides and mini-couse can share in the success.

Now that the background is out of the way we can get on with sharing and assisting you to generate money by learning to trade forex as a starting point here and then branch into other areas that you find appealing.

There are many investment websites online that present the information in a random and confusing way, this is especially the case with the recent explosion in forex and the ability to open an account and start trading with as little as $100. We at www.forexandstocktrader.com are looking to build your knowledge in a logical sequence if you are just starting to learn forex trading and then will build on this knowledge as your experience grows. You can also, if you have the basic background, skip over sections to find what is most important to you.

So lets start with What is Forex Trading?

Forex or FX trading is short for foreign exchange, simply the first two characters of each word to gain the abbreviation. So forex trading is currency trading. When you complete a forex trade you are simply exchanging one nation’s currency for another with the view of making making money when the exchange rates change at a future point in time. Exchange rates are constantly changing due to market news, national events, changes in values on a country’s stock exchange and numerous other micro and macro economic occurrences.

For a simple example, imagine you exchanged some US dollars for British pounds. You might sell $1,000 to buy £650. Within a short time the rate changes in your favour and you change them back again. Now with the new rate you get $1,010 for your £650. You just made $10 or 1% of your investment. For anyone that has travelled overseas you may have seen this in effect when changing from one currency and back and when you return.

Active currency traders do this all of the time with the aim of increasing their funds through many small trades, sometimes also referred to as scalping. One of the benefits of trading forex is that you can trade on margins, that is leverage so that you can control larger amounts with only a small investment.

In the above example, you might only have to commit $10 in your brokerage account to make the purchase even though the amount being traded is $1,000.

The broker covers the rest on the assumption that the market is unlikely to go against you by more than 1% in a short time – and if it does, a stop loss will usually be in place to ensure that you cannot lose more than your $10.

There are also a number of very good FX brokers out there that will also not allow you to margin trade more then the funds available in your account. This is a massive improvement as you no longer have to worry about large currency fluctuations leaving you with a margin call.

This feature is also very good for the novice forex trader as you are able to start with a small amount of money, such as $300 in a mini account get a feel for forex trading, knowing that this is the most you can lose. I strongly recommend your broker has this feature.

It is important however to take your trading seriously, this is the key to learning to be a successful and profitable trader even if you are starting out only with a demo account, look carefully at your trades, take lots of notes and analyse why a trade turned out the way it did. Ask yourself - Was that expected? Why did it move in that direction? Did I read the chart correctly? What conclusions or assumptions have I made?

So here is another question. Why Forex Trading?

Forex trading has been around for over 30 years but has been limited to the largest of national and international banks, actual governments, large multi-nationals and hedge funds. The rise of the internet has allowed over the last 4-5 years ordinary people to get involved although the financial institutions are still the major players and trade in the trillions daily, yes trillions.

The Bank for International settlements puts the average daily turnover for foreign exchange at $3.98 trillion. So given nearly US $4 trillion changes hands every day on the currency trading markets you will understand that only a small part of this belongs to ordinary people like you and me. But it is these massive volumes of money that allow you and me to make money through forex trading.

So the basics that you will need at a minimum to get started are a high speed internet connection, a good forex system or the time to learn and develop your own system, and some money to invest. As mentioned you can start with demo accounts from most forex brokers to understand and practice, or as I have done more recently test out the profitability of forex expert advisors or forex automated systems.

Also you do not necessarily need a lot of money. Brokers now offer mini forex trading accounts and even micro forex trading accounts which you can open with just a couple hundred dollars. However, it is better to have more, even if you do not put it all into the account in the beginning. Forex trading is risky and if you only have a couple hundred dollars, you probably should be doing something safer with it.

Let's take a look at why forex trading could be a better option for you than stock or commodity trading.

1. No commissions and no fees.

If you have experience trading stock on stock markets like the NASDAQ you will know how your profits can be eaten away by brokers, exchange and even government fees. Every time you are making a buy or sell you are being slugged with $19, $30, $100 a trade! The global nature of the forex market means that you do not have to pay any of these. In the forex market brokers make their money through the spread, which is the difference between the bid and ask prices of a currency. All you have to do is be sure that the price will go your way far enough to cover this. An important side note we will cover later; you want a broker that has a small spread.

2. No fixed lot size.

In commodity futures markets, the size of a lot or contract is set by the exchange and you cannot buy or sell less than one lot. But in spot forex trading you can theoretically set your own lot size. Most brokers have their own standard sizes but you can shop around and look for a broker who offers small or fractional lots.

3. A 24 hour market, five days a week.

For the whole of the global business week, that is globally, Monday to Friday 24 hours a day the forex market never sleeps. This is great if you need to trade outside of normal business hours. You can work at your day job from 9 to 5 and trade currencies in the evenings. Or you can start whenever you get up in the morning, even if it is 5 a.m.

Here is a common scenario. Just imagine working on your forex trading system and identifying a trend in the exchange rates of two currencies, you execute the trade, go to bed and wake up in the morning seeing that you have made a profitable trade into the $100's or $1,000's. There is perhaps no better feeling then getting up to see that you made money while you slept!

4. High leverage.

Forex brokers can offer up to 200 times your margin deposit in leverage, although 100 times is more common, personally I stick to 1:50 This means that you have the chance to make a lot of money from only a small deposited fund. You would only need $100 or even $50 to control $10,000 dollars in a trade. As long as you have good risk management and remember that high leverage also means high risk, this can open up the possibility of a high return on your investment. You should look at starting with small leverages and work your way up once you have mastered the basics and are confident of trading successfully.

5. A massive market with high liquidity.

The forex market is so huge that even the banks, big as they are, each have limited influence. Insider trading is not an issue. And high liquidity means plenty of money in the markets so that you are never stuck unable to close a trade. You can even set software to close your position for you at a certain level of loss or profit. In addition the market is driven by factors and information that is readily available to everyone, for instance a major influence on rates involving the USD are federal reserve monetary announcements, such as interest rate changes. Very simply put, if the central bank rate in one country is vastly higher than that of others there is good chance investment and money will flow into that country, as investors are getting a higher rate of return, through the higher interest rate, then they would in other countries.

6. Free tools and information from your broker.

Brokers are in strong competition with each other to attract retail traders so they are offering more and more features. We will look at how to choose your broker in a later section. They will offer you a demo account where you can practice your trading, sharpen your skills and try out or even develop your own system before you start to use real money. They will also provide the charts that you need to identify trends, and give you access to breaking forex news, all for free. In addition more brokers are offering training courses that you can take with them, generally for a fee, to learn more of the fundamentals, such as technical analysis, how to use charts and identify trends and much more.

7. Low start up costs.

A good modern computer with a high speed internet connection is all that is needed to begin trading currencies. If you want to use a robot for your trading you can find one for $100 to $200. Plenty of information on trading currencies including advice on systems is available for free online. A note here, yes forex robots, or as they are actually known forex expert advisors, do work successfully and are worth the investment. But it is still important to have an understanding of how forex trading works and the terminology used.

8. You are in control.

As a forex trader you will be in full control of your investment. You can access your account through your broker’s software platform and make the trades in real time yourself, 24 hours a day.

You also have control over the currencies that you buy and sell. You are not limited to dealing in your own country's currency. This means that if your national economy is in a very unpredictable state you can switch to trading two other currencies that are more stable.

So there are 8 good reasons to choose forex over other forms of financial trading. Now let’s move on to the basic information that you need to be familiar with so that you can start trading.

Lets have a lok at Forex Trading Basics