Open Your Forex Account

The first step to becoming a forex trader is opening your forex account.  Generally, opening an account is fairly simple and only requires you to submit your name and certain personal financial information.  Some experts advise new traders to open two accounts: one for making real trades and another as a “demo account”.  A demo account allows you to get used to performing the trade transactions without risking any of your real money.

Use a Registered Forex Broker

If you are new to forex trading, it is wise to get the assistance of a registered forex broker.  If you like, you can use a forex broker to help you establish your forex account.  Brokers are financial professionals who can help you select an investment strategy that will help you meet your goals.  It is important to ask about the broker’s qualifications and licenses before you employ his services.

Minimize Risk Exposure

The foreign exchange market is far more risky than a traditional stock market, because it operates 24 hours a day, six days a week.  This means that the round-the-clock trading can negatively impact the currencies you hold, causing you to face a higher risk of losing your investment.  A great way to reduce your risk exposure is to establish a stop-loss limit in a forex software platform.  This will automatically sell your investment in the event that the value drops below a certain amount.

As currency trading operates 24 hours per day, someone, somewhere in the world is waking up and is ready for work while someone else is finishing work for the day.  When the markets are opening in New Zealand, those on the other side of the world are closing and vice versa.

Growth in importing and exporting between countries has also increased the demand for foreign exchange to pay for the goods and services in a different currency.  While countries have different currencies, there is likely to be the demand for a forex market.  The forex (FX) market is currently the largest market in the world and trillions of dollars change hands every day.

About the Forex Market

The Forex market, or foreign exchange market, is open for trading 24 hours a day, five days a week. Multiple countries perform financial transactions through the Forex market and international financial institutions conduct daily business in the market. This free flow of capital means that investors will always find someone to purchase or sell currencies during any trading period.

Trading Currency Pairs

Unlike traditional stock markets, the Forex market enables investors to purchase national currencies, rather than shares of stock in an individual corporation or commodity. Currencies are expressed as pairs, which display one currency’s worth against another’s. An example of a Forex currency pair could be GBP/USD, which expresses the value of the Great Britain Pound against the United States Dollar. If the pound is trading higher than the dollar, investors may decide to sell their dollars and purchase pounds. Since the operation of the Forex market is so different from national stock markets, new investors may find it beneficial to purchase an online Forex trading platform with predetermined trading strategies for them to try. Internet reviews, such as CitiFX Reviews, are there to assist traders decide which platform to purchase.

Day trading involves buying and selling a currency within the same day. The trade could occur within a couple of minutes or hours. It is best suited to those who have constant access to their computer throughout the day and who are suited to making informed decisions quickly. They must be able to handle excitement and nervousness and also must be able to accept making losses, as day traders tend to make both losses and gains; the aim is to gain more than they lose.

Swing trade involves trading currency within anything from a few hours to a couple of weeks. Newcomers are more likely to succeed with swing trading and traders do not have to invest as much time. Successful swing traders are good at identifying the range or trend, have a good understanding of their chosen currency pair and have a good strategy.

Position trading involves buying and selling a currency within months or years. Position traders are patient and can tolerate risk, because often their currency will be at a loss for a period of time and they need to be able to give it enough time to increase in value in order to benefit from their choice. The best position traders have in-depth knowledge of macroeconomics.

The answer is a qualified yes.  If you do your homework and you are able to control your emotions, and trade according to a systematic trading plan, it is indeed possible to make money consistently with online currency trading.

Before you start you must first familiarise yourself with the basics of the forex marketplace.  You should at least know what currency pairs are; you should be familiar with technical and fundamental indicators and you should be able to interpret charts.

While this may seem daunting at first, there are a myriad of free and commercial courses available on the internet to help you get going.  Do not try to become an expert overnight: just make sure you understand the basics.  The most valuable lessons of trading will be learned the hard way – through practical experience.

Your next step should be to sign up for a free demo account.  Once again, you will have a wide selection from which to choose.  While many experienced traders might frown at the use of demo accounts, for a novice this is still an easy way to learn to trade under real life conditions without risking a cent.

Do not start trading with real money until you are able to make money consistently on the demo account. 

The forex trader has many options when it comes to forex charts.  Some of the more popular types of charts are line charts, bar charts and Japanese candlesticks.  The latter have virtually become the standard for professional forex traders.  They were initially developed by astute rice traders in Japan to help them predict the future price of rice.

A typical Japanese candlestick chart gives the following information: the opening price of the currency, the closing price, the highest price for the day and the lowest price for the day. 

When combined with relevant technical indicators, these charts can become a powerful instrument to help a forex trader anticipate future market movements.

Whether to use weekly, daily, hourly or even 5-minute charts, this depend on the time frame in which you trade.  Long-term traders, such as institutional traders, often use daily or weekly charts.  Day traders, who open and close their trades within the course of a single day, prefer hourly or even 5-minute or 1-minute charts.

Your trading software should be able to import price feeds.  Whether these feeds are live or delayed will once again depend on your trading preferences.  Long term traders will be perfectly happy with daily prices, while day traders will insist on live prices since they often have to make trading decisions within very short time frames.

Individuals can download a forex trading platform, such as MT4, and watch the trades live if they wish. A managed forex account offers a chance to participate in the forex market when traders are unable to watch the market around the clock. They are also the perfect solution for those who want their funds to be managed by professionals, and some reports indicate that they are a way of enhancing a portfolio that is independent of market performance. In many ways it makes sense to consider spreading commitments over a number of managed forex accounts and other investment opportunities.

The best forex training resources will provide information about how to handle price swing: for example, on a daily basis, the forex trading system responds to the different times when the opening of separate markets coincides. Currency trading normally remains at a high level, however there are peaks in activity when both American and European markets operate simultaneously. Usually, this happens between 8pm and 11pm Greenwich Mean Time (GMT).

Trading forex is fast and can be furious – a trader might buy a currency and then sell it again as soon as the price rises. There is a large amount of risk involved in such transactions, and considerable losses can result, particularly to those who are dependent on the money at stake. Having said that, day trading can deliver positive results and a significant proportion of forex trades are made via day trading.

Important aspects of day trading include the ability to stay calm, rather than reacting to losses; trying a variety of techniques, day-to-day; making decisions in a measured way and keeping good records.

Some brokers link directly to the trader’s currency trading platform and send forex signals so that trades are carried out automatically when the position is entered.  This means the trader has no need to do anything manually or to wait for an alert, and that trades can be placed at any time of day on any day of the week.

Brokers usually use technical analysis to generate signals and some trade in specific ways, such as with a focus on short term trading, perhaps holding positions to minimise exposure for a few hours at a time.  The number of currencies for which signals are sent can be quite limited; between three and eight currency pairs is not unusual.  Forex signals are normally sent at a given time every day, and include Buy Stop and Sell Stop positions.  Brokers aim to get the best possible number of pips on a monthly basis and many advertise an average yield of between 300 and 800.

The Australian currency, along with that of New Zealand, is considered a commodity currency, owing to the two countries’ dependence on mineral and farm exports.  This means that the Australian dollar rallies during periods of global expansion and tends to fall when mineral prices drop.

The Reserve Bank of Australia (RBA) has set very high interest rates for an industrialised country and also has a relatively high liquidity.  This makes the Australian dollar very beneficial for those looking for a high-yield investment over a short-term, meaning that currency traders commonly use the AUD in order to make the most money.  The economy accounts for only 2% of global economic activity, but its currency accounts for around 7% of worldwide forex transactions.  The AUD has been free floating since 1983.