Online Trading : Stock, Currency, Options,

Forex Trading: As I am sure you know by now, I am a trader that works from home trading forex online full time. I have traded all the other instruments I discuss on this web site ( and some I haven't) so I speak from experience. I practise what I preach and am unlike virtually all the other people who teach or advise, in that I actually trade forex full time. The reason I enjoy trading currency is simply because I find it suits my personality, it does not involve an enormous amount of time in research of the markets, and is one which it is very easy to go both long and short. The markets are traded 24 hours a day, so trading can be fitted around my lifestyle.

The only time the markets are closed is over the weekend ( time to catch up with my shopping!) Since the making bread site has been published I have been asked so many questions on forex trading, that I have decided to develop a separate site which will provide a free resource for all of you wanting to make a start as a forex trader. For those of you that read my currency trading blog, the new site will include suggestions on trades, how to get started with mini and regular trading accounts, trading styles and methods, and live charting.

Online Trading: Forex Trading - The Basics

One of the questions you might have when you start looking at this market is 'what am I actually buying or selling'?- the short answer to this question is nothing! The retail FX ( FX =Forex= foreign exchange=currency ) market is a purely speculative one and no physical exchange of currencies ever takes place. All trades exist simply as computer entries and are netted out depending on market prices. The reason the market exists it to allow large organisations to trade large amounts of currency easily. This constitutes approximately 20% of transactions. The remainder is speculators simply trading on rate movements via Forex brokers!  The leverage that is offered in the currency markets is extremely high for the simple reason that if you traded with real money in Forex, most traders would not have enough cash to allow sensible trades to be made.

The smallest movement is a pip and on an amount of 1000 US dollars, a 1 pip movement would yield 10 cents profit ( or loss ). Now bear in mind that a 100 pip movement in a day is a reasonable size move, so you could stand to make 10$ on the day (this hardly sets the pulses racing!). In order to overcome this problem the forex brokers offer leverage to allow you to trade at meaningful levels. These vary from 1:50 up to a suicidal 1:400 which means that for 1000 USD in your account you could trade 400,000 USD in the market ( this is equivalent to $40 per pip movement so for a 100 pip movement in the wrong direction, you would have lost 4,000 USD) With only 1000 USD in your account you would have received a margin call or been closed out by the forex broker - not bad for one day's trading!! This is why forex trading is such high risk and ONLY for experienced traders.

One of the unique aspects of the forex market, is that we do not have volume showing to assist us in our chart reading, so your candlestick analysis has to be excellent, as you will need to interpret and analyse purely from the candles themselves.

Now - a quick lesson in currencies. All major currencies are traded as a pair such as GBP/USD or EUR/GBP. Each currency pair has its own chart and as you would expect there is a spread between the two currencies. This varies from forex broker to broker, as does the leverage. Another unique aspect of currency trading is there is no commission!  Suppose you think the GBP/USD pair is moving up in price ( the dollar is weakening against the pound), then you might decide to go long the GBP. In buying the pound you are automatically selling the dollar. Every pair has a pip quoted price - this is normally 2, 3 or four decimal places depending on the currency. For each pip movement you would gain or lose 1USD. If you wanted to sell( or short ) the GBP/USD you would sell one contract instead. It really is this simple. Naturally there are other aspects to consider such as fundamental data, etc. but in essence that is really it.

Unfortunately, this simplicity belies the risks and dangers involved thanks to the leverage required to make a meaningful trade size. Just as in online poker, it is very easy to open an account and to start. The typical cycle goes something like this - new trader rushes in full of confidence and optimism with small amount of money - opens large position with huge leverage and is wiped out very quickly. Having learnt lesson one, they then return some time later, with a larger fund and trade much smaller size lots ( contract sizes ) until they have built up their online trading experience. They may or may not succeed. I did much the same myself, but was lucky. I rushed in and opened six positions all of 10 contract size. I was therefore trading 600,000 USD in a world market running to trillions, with no previous experience and no plan. MAD. In a few hours I was 2,500 dollars negative. I sat up all night and watched the positions move ever lower through Asian trading. Quite why I sat up all night I have no idea - I probably thought I could influence the direction by the power of positive thought !!!!!! - to cut a long story short I managed to close out at a profit of a few hundred dollars the following day. I was lucky - you will probably not be so fortunate. If and when you come to this market, please learn from the above. The main reason most people fail  trading forex is from under-funding. Because you can start with a very small amount of money( and trade large quantities) this is what most people do - they quickly lose their money. The only reason I survived was because I had over 10,000 dollars in my account. IN MY OPINION, THE MINIMUM YOU SHOULD START TRADING WITH IS 5,000 DOLLARS AND PREFERABLY 10,000 DOLLARS.

Online Trading: My FX Web Sites

As I said earlier, I will have a dedicated web site up shortly just for forex trading. It will cover all the basics for you, including technical and fundamental trading, deciding what type of trading style suits your personality and lifestyle, hedging risk, correlation, carry trades, and some suggestions on the type of forex brokers to look for in the marketplace.  I hope to have this available shortly so please bear with me - it will cover all aspects of online forex trading - and more!! Currency trading site now available !! I also have a dedicated currency trading blog

Since launching the above site, I have also developed several other currency related sites which you may find of interest. The following, have all be designed to explain the various fundamental and technical aspects of a currency pair, and the economic factors that you need to understand in order to be successful as a currency trader. I have listed these sites below and I hope you find them useful in your trading.

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