How to start with forex?

One Comments to “How to start with forex?”

• Michael M says:

  November 30, 2009 at 7:44 pm

  Here’s the answer I gave to the same question yesterday:

  First, learn about the 50% retracement rule. This is the single most reliable and simple rule for a beginning trader. You may ignore every other “technical” or chart indicator when you are first starting out. You may learn about this by googling for it, or by finding a book.

  Second, learn what to expect and what not to expect from the “advice” that you will find in your search to learn how the stock or commodities markets work. This “advice” will come in the form of fundamental analysis, news, websites, technical analysis, stock brokers, investment advisors. The best way to learn which things to pay attention to and which to ignore, is to read the book “WAll Street: The Other LAs Vegas.” It might sound like a cheesy title, but it’s a good book written by a dancer who started trading in stocks, and learned what to trust and what not to trust. He learned the hard way. Once he figured it out, he turned some 50 thousand dollars into two million.

  Third, you will need to develop a trading plan. This will be primarily based on your 50% retracement. rule. To this you will add a method to control your losses. For beginning traders, the easiest way to do this is to learn how to use “stop losses.” So you will enter trades with the rule, you will let your profits run, and you will limit your losses.

  Next, you will open an online account with a stock, currency or futures brokerage. It doesn’t matter which. Day trading is all the same. If you want to trade stocks, trade stocks. If you want to do currencies or futures, do those. The differences between them are as follows:

  Stocks usually require several thousand dollars to trade. They tend to charge higher commissions and fees. With stock accounts you can usually buy a “little” more than how much cash you have. It’s called “margin.”

  You can open up a currencies account with *very* little money. Like, $250. Currencies are highly “leveraged” trading. Meaning a little goes a long ways. It’s good and bad.

  A futures account is for trading commodity futures, stuff like oil, sugar, coffee. Again, highly leveraged. You need a minimum of 10,000 to open up this one.

  If you live in the US, here are the things to look for when you shop for a brokerage:

  - If you’re going to trade STOCKS, look for a brokerage that is a member of the FINRA and SIPC. This means the company is “regulated” and you won’t have to worry about them stealing your money.

  - If you’re going to trade CURRENCIES or FUTURES, make sure the company is a member of the National Futures Association (NFA).

  Next, open up your account. If you open a currency or futures account, the cool thing is, you can “practice” trade with their demo accounts for as long as you need. This is very useful. I recommend doing it.

  Finally, once you get used to trading, start learning about additional methods of risk control. Such things as option spreads are very useful.