Tuesday, October 2, 2007

Trading Tips for the New Forex Market Trader

For those of you who are new to the Forex market, or those of you who are considering becoming a Forex market trader will find this article on trading tips to be most helpful. You’ll learn what Forex is and what it does. You’ll also learn six trading tips that will help you in your transactions.

First, for those of you who are new you’ll need to know what Forex is. The FOREX or Foreign Exchange market is the largest financial market in the world, with an volume of more than $1.5 trillion daily, dealing in currencies. Unlike other financial markets, the Forex market has no physical location, no central exchange. It operates through an electronic network of banks, corporations and individuals trading one currency for another. The Forex market got its start back in the early 1970's when floating currencies and free exchange rates were first introduced. At this time, the Forex market traders were the only players on the market to decide upon the value of one type of currency against another, all solely based upon a particular currency’s supply and demand

The Forex market is unique for a number of reasons. First of all, it is one of the few markets that requires very little trading qualifications, is free from any external control and cannot be manipulated in any way. As the largest financial market, with trades reaching up to 1.5 trillion U.S. dollars, or USD, the money moves so fast, it’s impossible for a single investor to substantially affect the price of any major foreign currency. In addition, unlike any stock that is rarely traded, Forex traders are able to open and close any positions within seconds, because there are always a number of willing buyers and sellers.

1. All you have to do to open a Forex account is fill out an application and provide the necessary identification. The application includes a margin agreement and will state if the broker will be allowed to intervene with any trade when it appears too risky. This agreement is made to protect the interests of the broker because most trades are done using the broker’s money. However, once you have established an account, you can fund it and begin trading in the Forex market.

2. In order to become a successful trader, you will need to adapt your own trading strategy. There is no one strategy that will work for all traders. Individual traders will need to develop their own approach to the market. While some traders may rely solely on technical analysis, others may prefer a more fundamental approach, while the more successful traders use a combination of both. Each individual trader will need to learn the best approach for his or herself in order to gain a comprehensive overview of the Forex market.

3. Before you take any position, look over the top five currencies to make sure you’re not missing something. The top five foreign currencies in Forex are: USD/Yen, Swiss franc/USD, Euro/Yen, Euro/USD and Pound/USD.

4. Prices move by trends. There are certain movements that have been studied over many years in order to identify a pattern in the trend. These trends need to be understood in order to understand a good trading strategy. For small accounts that are $25,000 and under, trading with a trend may help improve your odds when compared to bi-directional trading. Most new traders will look to trade in any direction, when they should be trading with a trend.

5. For new traders it is safest to have two accounts to learn as you play the trading game. Keep one real account that you will use to actually trade real money. Have a second demo account that you can use to test alternative moves in the trading game. You can easily use your demo account to shadow the trades in your real account so you can see if you are being too conservative or not conservative enough.

6. Always examine the one hour, four hour and daily charts that concern your trades. You can trade at 15 and 30 minute time intervals but doing so requires a bit of juggling.



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