A Beginner’s Overview of FOREX (Foreign Exchange) Trading

Beginners to the world of investing are confronted with a plethora of choices regarding the types of things worthy of investment, as well as the style by which these things are bought and sold. Investors generally fall into two types, the ones who prefer a “buy-and-hold” strategy and those that wish a more active trading experience.

Active traders buy and sell stocks, commodities and currencies and may even dabble in the options and futures markets from time to time. One of the most popular active trading fields in the last decade has been foreign currency, or forex, trading. The flexibility and liquidity of the world’s largest global market is appealing to many, and the Internet has made accessibility available in real time for even the smallest of individual investors.

As there are beginners’ guides for investing for stocks, there are similar tutorials on the Internet for aspiring forex traders. After learning a bit about the profession, the next step is to enroll in a qualified training class to learn the in’s and out’s of the trade. As with any other performance-based pursuit, an amateur needs to observe the actions of a professional and learn how he became successful. Your chosen expert will teach you about forex charts and how important they are in guiding you through the maze of pricing movements that appear on your trading screen. Indicators will help you discern trends and indicative patterns that suggest the right time to consider buying or selling.

Also Read: 7 Reasons people prefer to be their own Financial Adviser?

You will also learn that currencies come in pairs and represent the relative value that the market is assigning to each country’s fundamental economic factors. For example, there is uncertainty in the present market as to whether the European Union has the will and the power to respond effectively to the debt crisis in Greece and other European member states. This fundamental fact has caused the Euro to weaken related to most all other currencies, as evidenced by the technical action observed in respective forex charts. Staying current on fundamental facts that could affect the currency pairs of your choice will be a priority effort that you will have to perform. Knowing where and how to access useful data is key to effective trading.

However, the most important part of your training will involve your spending hours honing your trading skills on a free forex demo account. Your virtual currency will be used with real data to create a what-if trading experience. You learn to develop a trading strategy, execute it in a disciplined fashion, which means keeping your emotional involvement in check, and see the results accumulate over time.

Foreign exchange trading is a risky business, and most all of early failures are due to novice traders not putting in the required practice time. Eagerness and impatience will doom you from the start. Six months is not too short a training period, and many successful traders have put in over a year of practice to gain the confidence and consistency necessary to achieve the results they desire. NO Shortcuts Allowed, (Emphasis Added!)!

A few words are also appropriate regarding investment fraud. The criminal element is well trained, and has invaded the world of forex, primarily because of the popularity of forex trading. Always deal with a bank and broker on-shore that you know and trust. Beware of unsolicited offers received via email or any other medium. Crooks know how to deceive. They have had years to perfect their art form. Studies show that educated people are the most susceptible to scam artists, so you have to be your first and last line of defense. Be alert, be safe, and if it sounds too good to be true, walk the other way!

For anyone to be successful at financial planning and investing, preparation, knowledge, experience and control of one’s emotions are paramount to achieving that desired outcome. Staying alert for potential fraudsters is also a necessary task in today’s Internet world where business partners are invisible. Once these activities are mastered, forex trading can actually be fun for a trader with an active spirit and will to succeed, and it can also be a rewarding experience at the same time.

[Editor’s Note: This post is submitted by our Guest Blogger Vincenzo Desroches, founder of Forex Charts which is a website about Forex Trading. If you also want to write for EquiTipz, read this.]