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Forex for Dummies
Forex Basics
If you've already read our What is Forex? section
then you should know what Forex market is and what it is all about. If not,
please, do so.
There are five essential aspects
of foreign currency market a beginner trader (and an old one as well) should be aware of:
- Forex Fundamental Analysis
- Forex Technical Analysis
- Money Management
- Forex Trading Psychology
- Forex Brokerage
Understanding and mastering these sides of trading are crucial to organize your
Forex trading experience.
Forex Fundamental Analysis
Fundamental analysis is the process of market analysis which is done regarding
only "real" events and macroeconomic data which is related to the traded currencies.
Fundamental analysis is used not only in Forex but can be a part of any financial
planning or forecasting. Concepts that are part of Forex fundamental analysis: overnight
interest rates, central banks meetings and decisions, any macroeconomic news, global
industrial, economical, political and weather news. Fundamental analysis is the
most natural way of making Forex market forecasts. In theory, it alone should work
perfectly, but in practice it is often used in pair with technical analysis.
Recommended e-books on Forex fundamental analysis:
Forex Technical Analysis
Technical analysis is the process of market analysis that relies
only on market data numbers - quotes, charts, simple and complex indicators, volume
of supply and demand, past market data, etc. The main idea behind Forex
technical analysis is the postulate of functional dependence of the future
market technical data on the past market technical data. As well as with fundamental
analysis, technical analysis is believed to be self-sufficient and you can use
only it to successfully trade Forex. In practice, both analysis methods are used.
Recommended e-books on Forex fundamental analysis are:
Money Management in Forex
Even if you master every possible method of market analysis and will make very accurate
predictions for future Forex market behavior, you won't make any money without
a proper money management strategy. Money management in Forex
(as well as in other financial markets) is a complex set of rules which you develop
to fit your own trading style and amount of money you have for trading. Money management
play very important role in getting profits out of Forex, do not underestimate
it. To get more information on money management you can read these books:
Forex Trading Psychology
While learning a lot about market analysis and money management is an obvious
and necessary steps to be a successful Forex traders, you need to master your emotions
to keep your trading performance under strict control of mind and intuition. Controlling
your emotions in Forex trading is often a balancing between greed and cautiousness.
Almost any known psychology practices and techniques can work for Forex
traders to help them keep to their trading strategies rather to their spontaneous
emotions. Problems you'll have to deal while being a professional Forex trader:
- Greed
- Overtrading
- Lack of discipline
- Lack of confidence
- Blind following others' forecasts
These are very professional books on psychology written specially for
financial traders:
Forex Brokerage
Every Forex trader like any other professional needs tools to trade. One of these
tools, which is vital to be in market, is a Forex broker and specifically
for Internet - on-line Forex broker - a company which will provide
real-time market information to trader and bring his orders to Forex market. While
choosing a right Forex broker things to look for are the following:
- Being a professional company you can trust
- Provide you with real-time quotes
- Execute your orders fast and accurately
- Don't take a lot of commissions
- Support the withdraw/deposit methods you use
For beginning Forex traders I recommend these three broker companies, which are
probably best Forex brokers to start with:
- LiteForex - broker that supports MetaTrader 4 Forex trading platform and doesn't require a lot of money to start with.
- Marketiva - good because you can start trading Forex with as little as 1$ and you also receive start-up bonus of 5$, while you can deposit and withdraw money via e-gold (Wire Transfer is also available).
- ForexYard - Java based trading platform available, while you can deposit and withdraw money via e-gold.
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