What Do I Need to Start Trading Forex?

There are a few things that you should know before you embark on the long learning curve of becoming a forex trader. To start trading forex one needs to first look at their personality traits and decide whether forex trading is really for them. A successful forex trader is disciplined, of sound mind and above all has patients. There are various tools that a forex trader will use to aid their trading decisions and software to initiate the trades; these are the things I would like to discuss in this article.

It is a misconception that one needs thousands of pounds or dollars to speculate on the forex market, it is however a successful traders opinion that one should have a plan of loss management. Loss management or money management normally follows the simple rule that one will not risk more than 5% of their trading balance on any one trade. This is a concept to bear in mind when you start to trade forex.

The software used to initiate forex trades is called spread betting platforms; there are many companies to choose from although some have been considered not to be completely legitimate. It is important to choose a spread betting company that is registered with the financial services authority for peace of mind. From your spread betting platform you will be able to place instant trades on all the major currencies and a lot of the minor ones. You can also place orders for trades to be activated at a certain level. You will notice that different spread betting platforms have different spreads; a spread is the cost of getting into a trade, for example, to go into a trade on the GBP/USD may cost you 3 pips in which case you will start your trades 3 pips behind your price which you must make up in order to be in profit.

The most important thing to have access to be forex trading is charting software. Charting software is the tool that will display all the technical data that will help you make the decision on where to enter and exit trades, without this software you might as well put your money on a roulette wheel because you would be essentially gambling. A good spread betting company will provide you with charting software for free or for the understanding that you place a certain amount of trades with them a month.

Before you start trading forex with real money it is advisable that you learn all you can and trade with a demo account first. A demo account will also be provided by a good spread betting platform that allows you to trade real time with play money to test out your trading theories

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Advanced Bollinger Band Trading

Bollinger band Trading can be used by traders for a number of purposes and that is part of their appeal. Novice traders can use them for simple trading methods or expert traders can take advantage of the data they provide to perform more complicated analysis on the market. One of the best uses of the bands is predicting price breakouts. With the correct analysis the Bollinger band breakouts can be incredibly useful to traders because they can indicate that entering the market could be a bad idea if the direction of the breakout is unknown. On the other hand it would be wise to play the market if the direction of the breakout is made clear.

It is generally conceived that securities usually trade within a range for the majority of the time. Bollinger bands are one of the best indicators at demonstrating this because often the price of a security will rebound off the upper and lower band over extended periods and this is considered to be trading within a range. However there are occasions when the range is broken and often when it is it can create a drastic change in price and market direction. This is known as a price breakout and being able to accurately predict this breakout is essential for any trader hoping to make significant money. They can combine the trade ranging analysis with price breakout analysis to signify that a breakout is likely to happen and this information is invaluable to any trader.

There are a number of characteristics which must be present in order to accurately analyze a potential price breakout whilst using Bollinger bands. Firstly the volatility of a security should be very low. This is indicated by the space between the upper and lower bands being very narrow. Once these two bands are very constricted they should ideally both be heading in a horizontal direction. When the Bollinger bands behave like this it suggests that a price breakout is imminent and the market is very likely to move far out of the current trend. In this situation a trader can either decide to leave the market because they are unsure of the direction of the price breakout or they can try and play the market to potentially make plenty of profit.

A basic method of playing the market in this situation is to place a pending buy and sell either side of the current price. This ensures that no matter which way the breakout occurs a position in the market will be triggered but this could be subject to a fake movement whereby the market initially moves in one direction and then changes to its true course.

Another way of predicting the direction of the breakout is by using other indicators in conjunction with the Bollinger band Trading methods This is often a more reliable route and can help a trader feel more confident when making a move in the market because the evidence is more substantial.

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Learn to Trade the Forex Without Spending a Fortune

People wanting to learn to trade the Forex are faced with a huge amount of online resources to choose from. These range from free forums to very expensive mentoring from Forex teachers that can cost many thousands of dollars. So what does the aspiring trader do?

Because anyone can pass themselves off as a Forex expert you should be very wary about people who claim to be able to make you millions of dollars in a few short months. The reality is that there is a lot to master and it takes experience to become profitable on a regular basis. The nature of the Forex markets is such that lots of money can indeed be made but you need to have a solid forex education first.

The first thing I would say is that to begin with you do not need to spend any money, there is simply a huge amount of good free information out there. Spend a few months reading the content on babypips.com and forexfactory.com and you will give yourself a great foundation.

I am now a regularly profitable trader and I have spent less than $200 on paid services. Having said that I do recommend that you find a reputable Forex trading course or Forex tutorial to supplement your own online free research. Make sure you do your due diligence prior to signing up. Read the forums to see what other people are recommending. I would say that you should be easily able to find a good forex trading course for under $200.

The good thing is that most forex brokers allow you to set up as many demo accounts as you like for free so you can practice different strategies to see which suits your personality the best. I would suggest trading on a demo account for at least 6 months before risking a penny of your own money.

So to give you a summary of how I would go about learning forex trading, see below:

1) Sign up at babypips and forex factory

2) Sign up with a good forex broker

3) Read and practice for 6 months

4) Optionally find a well recommended Forex course for under $200

5) Read and practice some more (maybe until you can regularly double your demo account)

6) Fund a micro account with a couple of hundred dollars and start trading live.

That plan should set you up well to learn to trade the Forex.

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