Is Forex Right For You?

The Foreign Exchange Market (also known as Forex )

The size of Forex has now made any other investment market smaller to a great extent. It is becoming more and more popular every day.

Forex traders can make exchanges 24 hours a day 5 days a week, from Monday to Friday. There are many opportunities for the forex trader in the Forex market because of the constant movements of the exchange rates.

Traders can make profits both when the prices are high and low. Anyone can learn how to trade on the market. But it is very important to get the proper training and education before you start doing any live trading. The good thing is that anyone can practice with a demo account before starting any live trading. The good thing is the amount of money someone needs to place a trade is all that they can lose. Unlike other markets it is possible to start trading with only $100.

The transaction cost is very low and the market is the most liquid of all markets, so the trader can enter or exit it in almost any condition. Because of the forex market's twenty 24 hours trading, Orders are processed quickly without slippage. It is easy to find good brokers, with a little research who will close some or all of open positions if the account's fall below the level required to hold the positions. Everybody can trade online from home. It is a great opportunity for people who want to work from home, All that is needed to start trading is a computer with Internet access and a proper training.

The market is so huge in forex that it is impossible for anyone to control the market price for a long time. Trading currencies is much simpler than stocks. There are only a few major currency pairs. There is no waiting for months like in futures market. Trades in forex rarely take more than two days. The huge marketplace will grow bigger as more people are joining it every day.

Forex Day Trading - The Most Important Fact You Need to Know

If you are considering forex day trading, there is one fact you need to know above all others and its enclosed in this article.

The fact is that if you try it the odds are you will lose your money and lose it quickly.

Why?

Because all volatility within such a short space as a day is random and support and resistance levels are meaningless and you will may as well flip a coin. Of course if you think about it its obvious why:

You have millions of traders trading trillions of dollars each day and this mass of people and what they do cannot be measured in such a short time span as a day or less.

You will see a lot of day trading systems on the net and they all claim to make money - but there is a problem - none of them do, because none of them have been traded.

They all produce a track record in hindsight knowing the closing prices!

Well that's hard - if we all knew tomorrows price today we would all be rich but forex trading is not that simple. Whenever you see a day trading or forex scalping system with a track record look at the disclaimer and you will normally see the one below or a similar one:

"cftc rule 4.41 - hypothetical or simulated performance results have certain limitations. unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

Of course if you put this disclaimer on you can say anything you like and many vendors do. They know the system wont make money (that's why they have the good sense to not trade it themselves) better to sell it and make a guaranteed income by appealing to naive and greedy investors.

Day trading is a good story but that's all it is and it doesn't work in practice. I quite like Harry Potter as a story but I don't think I can fly!

If you want to make money in forex trading understand one key point:

You need to use data that allows you to calculate the odds and that means swing trading or long term trend following - where the data can be used to help you time your trading signal and enjoy long term currency trading success.

If you want to day trade the odds are not on your side and you will lose and if you don't believe me try and find a day trading system with a track record audited of trades and profit and loss and you simply won't get one.

How to Find Time to Trade the Forex

Have an interest in trading the forex market? However you feel you may not have the necessary time.

Here are the three biggest myths about the amount of time it takes to learn and then trade the forex:

1. You have to spend countless hours in front of your computer.

Nothing could be farther from the truth. In fact a primary reason trader's fail is because they spend to much time watching the market. Being glued to your computer is a bad thing. You read into things and make poor decisions.

One cardinal rule to follow, "plan your trade, trade your plan." All it takes is blocking out 30-45 minutes each day. This could be in the morning, afternoon or night. At a convenient time, use a planning worksheet to create a trading plan. Once this is done you can set an alarm on your trading platform that will email you or send you a text message alerting you to a potential trading opportunity.

2. I presently work so I cannot pursue the training process.

First, select the correct training environment. Look for programs that offer unlimited access. This means you can pursue the training at your own pace. When developing any new skill it is best to commit just a couple of hours per day 2-3 days per week. The individuals who overdo it and pursue an intensive crash course style of training always run into problems.

Statistically, the individuals who are currently working while pursuing a training process to learn how to trade do better because they approach the training process in a conservative fashion.

Secondly, look for training that is online. Classroom training with a fixed schedule is archaic. Online training allows you to have 7 day a week 24 hour a day to access via an online learning center. Unlimited access means a flexible training process tailored to your schedule.

3. Because of my job I need to trade on a large time frame.

Keep in mind the forex is open 5 days a week 24 hours a day. It has incredible volatility. Most individual traders get slaughtered trying to stay in this market for an extended period of time trading on large time frames (30 minutes or greater).

Here is the reality. Once you are in the market, as the hours pass the concern for your trade creates so much anxiety that you continually need to check on it throughout that time. Result: lost sleep, distracted at work. This particular myth is why so many fail.

Select a trading methodology that allows you to be in and out of the market in most cases in under an hour. Imagine this scenario. You create your plan at your own convenience. Hours later you receive a text message alerting you to a potential money making opportunity. You go online, set your trading order, 40-60 minutes later the trade is done. Profit achieved!

No lost sleep. No distractions while you are working. The reality is that trading on a small time frame works best for a working individual. It is the person with time on their hands that can trade on larger time frames. Here is another reality. Most people find they do not want to be in the market for extended periods of time because of the anxiety involved.

Forex Trading Using Technical Analysis

Technical analysis is the interpretation of price action through the use of charts and indicators.

Indicators have a very specific place in trading. The majority of popular indicators do not perform consistently in volatile conditions. There is too much whipsaw or up and down price activity. Because of this, indicators are best used on larger time frames and trading in markets with low volatility.

For this reason many individuals steer away from volatile markets. The reality is volatility is a good thing when traded correctly. Volatility equates to more profit taking opportunities, and the forex is the world's most volatile market. A key feature of the forex market is consistent price swings in very short periods of time. What this means to the trader is frequent short-term profit taking opportunities. It is important to understand this same volatility can get a trader into trouble trying to trade using the incorrect time frame. As one who trades technically based on price, you embrace this volatility. As a technical trader you do not care what the reason is behind this volatility. You just want to be able to understand the movement and, more importantly, take advantage of it.

Technical analysis operates on the theory that price reflects all known factors affecting supply and demand at that time. Hence a price chart is all we need to use to identify good trading opportunities or set-ups.

Markets are a reflection of human emotion. People make and move markets, not balance sheets. So by developing the skill to interpret price action, you develop an understanding of the view of all those trading it.

Price charts tells us what has happened in the past. And since the past tends to repeat itself, it can give us an indication of what might happen in the future.

In fact, technical analysis is the most powerful trading tool an individual can use. And because of this, technical analysis provides the framework for a systematic approach to trading. More importantly, it gives us the confidence to make our trading decisions. And both these aspects are critical for success.

Technical analysis provides precise mechanisms for trade entry and exit. Strategies that are based on technical analysis afford the trader higher probability trading opportunities.

One needs to remember there are countless patterns and strategies that fall under the umbrella of technical analysis. It is important to be trained in how to select the correct strategy to apply to the current market condition you are monitoring as well as the timeframe you are trading on.