profiting with ForeX

Learn the Basics

This is probably the easiest step.  You can easily find the information on the internet or in books.  Why not start with my favorite broker, Oanda?  You can learn a lot about the Forex markets and the Forex trading.

Decide What Type of Trader You Are

This is very important because your trading plan and strategy will be built based on this to suit your trading style.  Do you feel more comfortable to watch the markets and look at the charts at all times when you trade?  Or do you like to analyze the markets on a daily basis?  Do you feel comfortable if you leave a position open over night?

What Is Your Risk Tolerance

Some currencies are more volatile than others.  If you don't like big swings, that means you are not too comfortable with risks.  Therefore, you can pick currency pairs that are less volatile such as EUR/GBP, EUR/CHF, AUD/USD.  Having a tighter stop loss could help you reduce risk and loss; however, you might not want to set the stop loss too tight because it gets hit too easily before the trade turns profitable.

Fundamental Analysis or Technical Analysis or Both

Depending on the type of the trader you are, you can go with fundamental analysis if you are a long term trader and you prefer the buy/sell and hold strategy.  I personally focus on the technical analysis because my trades are short term.  I do carry positions over night but they tend to be closed within a week if not sooner.

Market Preferences

Since the Forex markets are running 24 x 5, we can't possibly monitor the markets all the time.  If you don't like to carry trades over night, you may want to decide which markets to trade in.  Asian markets tend to be slow and quiet.  European markets and US markets draw the majority of the trading activities.

Currency Preferences

I touched the currency preferences a bit in the Risk Tolerance section above.  I have my own preferences based on years of experience and observation.  These currency pairs are listed on the home page.  I chose them because they fit into my trading style.  I like the not-so-volatile currency pairs.

Develop Your Trading Plan

Once you learn the basics, know what the markets are about, decide the type of the trader you are and risk tolerance, it's time to draft your trading plan.  Here is my trading plan on the website for your reference.  In the trading plan, it is beneficial to have these key points:

• My investment capital
• My risk tolerance per trade as a percentage
• Currency pairs I want to trade  
• How will I trade

Create Your Own Trading Strategy

This is where the "How will I trade" from the trading plan section above comes in.  Keep your strategy simple and test it in a demo/practice account.  For example,

• Buy open when KD rises above 20
• Set stop loss 50 pips away
• Set a definite profit taking target such as 100 pips away
• Or constantly move up the stop loss.  When stop loss is hit, that is your profit taking target
• Sell when KD drops below 80
• Set stop loss at xxx
• Set profit taking target at xxx

Practice Forex Trading without Risking a Dime

Now that you have a trading plan and a trading strategy, it's time to test it and see if it works.  Test them in a demo/practice account.  Give it time.  Don't make a decision immediately because it is working in two weeks.  It's hard to say how long is long enough.  Give it 3 to 6 months.  If you know how to write scripts, you can test your strategy in MetaTrader.

Keep a Trading Journal

I always keep a trading journal so I can write down my thoughts and the hard numbers.  These thoughts and numbers can later help you fine tune the trading plan and trading strategy.

Share Your Experience and Ask Questions

I learn a lot by asking questions or just follow some discuss threads on various forums.  Internet has made the learning a lot easier nowadays.  The following are the forums I recommend: