Getting Started in the Forex Market: Part 2

Wednesday, 30 March 2011 01:30

Now that you have a better idea of what the forex is (click here to read the first part), let’s continue on with what you actually need.

What do you need?

The first thing you need to start trading the forex is to know how to trade profitably. Most brokers offer demo accounts which let you try their system for free. So before you put in real money, you must make sure that you face the action on a demo account. Only after you’ve managed to be profitable can you sign in for a real account. This process usually takes time, anywhere from a few weeks to a few months, so you must be patient.

While trading on the demo account, you will want to determine which trading strategy suits you the best. Which time frame do you want to trade? What are your entry and exit signals? How do you manage your risk? There are many tools available to you to come up with a strategy. You can choose to have a very rigid entry and exit system based on technical analysis of charts, or you can be more flexible by varying your trading based on how the market is feeling and by integrating fundamental analysis. A good start would be to spend some time simply observing the market, or even focusing on how particular currencies behave. What are the most volatile periods? How does one pair behave versus another one? How do particular news affect the currencies? You can answer many of these questions on the net, but making your own observations is even better.

You should also tailor your strategy to suit your life and personality. Would you like to spend the whole day looking at charts or only a few hours every week? What are your profit expectations? Does the strategy fit the profit expectations? How much are you willing to lose? These are all questions that you should try to answer.

You can read this article on how to set up a forex trading strategy for additional guidelines.

Once your strategy is set and you are confident you can make it, you can subscribe for a real account at a trusty broker. See this article on how to choose a forex broker for more information. Now even if you’ve managed to be profitable on demo, it doesn’t necessarily mean that you will be on a real account. So whatever your trading strategy is, you should ALWAYS keep in mind what all successful traders do: manage risk.

Material

If you are reading this article then you already have the material to get started: a computer and an internet connection — a high speed internet connection is recommended. Most of the traders like to have multiple monitors setup so that they can layout many charts at the same time. Many traders also like to watch CNBC or some kind of finance channel as an information source and background noise. Finally, Coke is the beverage of choice for traders.