Foreign Currency Trading 101

Last weekend at a party, some new friends asked me where and how to learn and trade Forex.  I gave them an over simplified response, and I promised them that I will write about it in the blog more extensively.  Therefore, this will be a series of  articles that I will write regularly.  Before I go on further, let me tell you that I trade only & only for myself and I don't gave advice on trades.  I am not compensated for this article, but I may in future.  As any investment, there are risks involved, so please learn as much as you can before choosing a system, a broker, or even investing a single dollar.  Once you think that you are comfortable and you are ready to open an account...please stop!...learn some more.

Forex is an over-the-counter market where buyers and sellers conduct foreign exchange transaction.  You can open a practice account with many entities, but I think you should wait because of temptations.  As you do well on your first 30 or even 50 trades, the temptation, the emotion, and the greed will take over your decision making process, and with this false sense of optimism you will take a larger risk that will result into a large amount of loss.  Here are your first few steps:

1. Pay attention to the financial and political news
2. Bloomberg TV for finance & for political CNN,  BBC, and/or DW-TV. 
3. Learn about how interest rates, unemployment, and CPI.  There are many more factors that move the markets, but this is a good starting point.
4. Look up any financial terms at www.investopedia.com
5. After a while, open up a practice account through Investopedia.  It will give you a good feel on how things work.  Please keep in mind that when you do open an account with any firm, their software will function differently.  It will be more comprehensive and with more capabilities such as trading from charts, indicators, and more...
6. Please do not be tempted to buy a Forex Bot or any automated software.  I have not found one that actually works yet.  For the beginners, it is a waste of money, and it is heavily marketed via Twitter

Please have fun learning about Forex.  You will not get rich overnight, but it sure feels good to make a little extra money.  I will post an article about this every week.

Sheen & Jalil