For beginners wanting to trade on the forex, there is a wealth of bad information published that casually skips over the basic currency trading skills needed before you begin speculating on currency. We should remember that trading on the foreign exchange is a skill, and reaching any meaningful and usable level of any skill in any discipline takes time. You don't have to look far for examples of professionals whose skills have necessarily been developed over many years.
Doctors and lawyers, sports professionals and craftspeople, all spend many years learning their respective skills. And even then some never achieve satisfactory levels of proficiency.
So, how come so many inexperienced people are prepared to put real and substantial sums of cash on the line to speculate on the currency exchange? Its madness. Success with any discipline comes with knowledge and practice. You've got to learn, practice, learn more and practice more before you can hope to consistently succeed with FOREX trading. There is no reason for not practicing while you learn for free. Online dealers offering free demo accounts are easy to find.
They offer you a very real trading experience with a free trading platform and some virtual funds to play with. You have access to, and use, real time data with a full range of charting tools and expert advisors. To all intents and purposes you are trading for real, but with no risk. The expert advisors are small add-on programs that sit in the trading platform software monitoring real-time data and known historic patterns to spot trends and potential opportunities. Different expert advisors use different strategies but most are simply automated versions of known manual systems.
It is important to learn and understand the rudiments of trading before embarking on your real money forex experience. Learning and mastering the fundamentals will assist you whilst you create a strategy that you can test and tweak to suit the different conditions of the market. But where does the beginner start?
What do you need to know?
As a minimum the novice would-be trader should familiarize themselves with the meanings and workings of:
The Spot market and what it offers.
Quotes and currency pairs. Every FOREX transaction has two sides, the quote currency and the base currency. The base currency is always 1 but the quote currency is variable.
Majors. The currency pairs of the most affluent trading nations.
Pips. The smallest unit a currency is traded in. For $US that's $0.0001
Spread. The difference between bid and ask price in pips.
Lot /mini-lot. The standard transaction size, mini-lots are 10% of a lot.
Leverage. A way of manipulating more money than you could otherwise afford.
Orders and order types. Learn to protect profits and minimise losses with different order types.
How to calculate profit and loss.
Never forget, the forex is a volatile environment and money is easily lost. Always test your strategies and understanding by using a free demo account. A free basic guide to the forex ebook can be found here http://www.slumpsurvival.com
