FOREX Training

Knowledge is the key to successful FOREX trading. The knowledgeable trader has greater awareness of how the market moves and more chances of making profitable transactions. Without knowledge you are shooting in the dark. You may succeed on a few deals but the odds are that you are going to lose in the long run.

Thankfully there's lots of information available about the FOREX and how to trade. You can find hundreds of web sites with useful advice and there are just as many books about all aspects of FOREX trading. If self-learning is not your style, there are training courses available that guide you step-by-step through the intricacies of Foreign Exchange.

If you have the time and the inclination, you can find all the facts you need on the Internet or in your public library. The problem with Internet sources, however, is that the information is generally unstructured. You may find bits and pieces of useful data, but finding a source that presents it in a step-by-step fashion is more difficult.

Study courses, on the other hand, present their material in a logical and structured manner that aids in understanding FOREX trading. The investment involved in a FOREX course may well worth the time saved in seeking out similar information on your own. There are courses available for both beginners and intermediate traders.

The cost of a FOREX course varies from free to $1000 or more. As with most things, you get what you pay for. Free Internet courses may give you the basics needed to begin trading, but usually omit the in-depth training needed to analyze charts and plot trading strategies.

There are two basic types of study courses. You can attend a class with a group of people, or you can sign up for an online course that is taken over the Internet. Classes are available in most major cities. You can attend a class to learn the basics or sign up for more advanced courses if you are an experienced trader. The advantage of these courses is that you get personalized attention – any questions you have can be answered directly by the instructor. The disadvantage is that you must follow the class schedule – if you miss one class it can't be made up at a later time.

Seminars are also a possibility for learning about FOREX. Seminars are usually aimed at experienced traders, but if you know the basics you could benefit from a 1 or 2 day seminar. These are available in most major cities, and you could expect to see seminars offered every couple of months. They are usually conducted by well-known FOREX professionals who can offer new insights and strategies in FOREX trading.

If you prefer to study at your own pace you should investigate online FOREX courses. You can log on to a website any time of the day or night and go through the course material as you see fit. If you have any questions, you can usually communicate with an instructor by email. Responses could take anywhere from minutes to days.

A variation of online courses is CDROM courses. These are done on your computer, but you order the study materials from a company and they arrive by mail. There may be little after market service offered with CDROM learning materials. If you have questions you may not be able to contact an instructor for answers. However, each company has their own policy about this, so find out what their service provides before putting down your money.

Other types of home training include video lessons. These can be watched in the comfort of your living room and are similar to attending a FOREX training seminar.

The best kind of FOREX training can be with an individual trainer or mentor. This would be someone with many years of FOREX experience who can offer insights and strategies learned through the course of conducting thousands of transactions. FOREX mentors usually charge a lot of money – thousands of dollars is not unheard of. Whether the cost is worth it is up to the individual to decide. Working with a master trader can provide valuable insight into the psychology of FOREX trading.

FOREX Trading Philosophy

Many beginning FOREX traders are captivated by the allure of easy money. FOREX websites offer 'risk-free' trading, 'high returns' 'low investment' – these claims have a grain of truth in them, but the reality of FOREX is a bit more complex.

There are two common mistakes that many beginner traders make – trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose you money. FOREX traders need to have a rational trading strategy and not allow emotions to rule their trading decisions.

To make rational trading decisions the FOREX trader must be well-educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit.

The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? Who is successful and why are they successful? This knowledge will allow you to identify successful trading strategies and use them as models for your own.

There are 5 major groups of investors who participate in FOREX – Governments, Banks, Corporations, Investment Funds, and traders. Each group has varying objectives, but the one thing that all the groups (except traders) have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves.

This means that the trader who lacks rules and guidelines is playing a losing game. Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must play by the same rules.

Money Management

Money management is part and parcel of any trading strategy. Besides knowing which currencies to trade and recognizing entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. Position size, margin, recent profits and losses, and contingency plans all need to be considered before entering the market.

There are various strategies for approaching money management. Many of them rely on the calculation of core equity. Core equity is your starting balance minus the money used in open positions. If the starting balance is $10,000 and you have $1000 in open positions your core equity is $9000.

When entering a position try to limit risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1000 to $3000 – preferably $1000. You do this by placing a stop loss order 100 pips (when 1 pip = $10) above or below your entry position.

As your core equity rises or falls you can adjust the dollar amount of your risk. With a starting balance of $10,000 and one open position your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800.

By the same principal you can also raise your risk level as your core equity rises. If you have been trading successfully and made a $5000 profit, your core equity is now $15,000. You could raise your risk to $1500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential.