About Currency Trading Training
Trading on the currency exchange markets is like ski jumping--but for a living. Foreign exchange is a way of life. Most traders stay far away from these markets because of the enormously high risk and poor predictability of this market. For people able to successfully call macroeconomic shifts in currency valuation, however, there are potentially mind-blowing profits to be made.
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Significance
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Foreign currency exchange--commonly referred to as FOREX--is simply the global market in currencies. FOREX traders, for the most part, tend to try to make money from very small shifts in currency valuations using substantial amounts of borrowed money--referred to as "margin." FOREX trading may seem deceptively simple because the number of assets that you need to track are relatively few, as there aren't that many commonly globally traded currencies. The difficulty comes into interpreting economic data and trends in such a way that makes it possible to bring in consistent profits.
Function
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Training to become a FOREX trader requires excellent trading discipline. Some of the techniques that can be useful to most FOREX traders are more general skills that will benefit any kind of stock trader--but particularly those skills that benefit very short-term trading. The majority of successful FOREX traders do not attempt to be macroeconomic wizards that can predict long term currency movements. Performing a fundamental analysis of a currency is nearly impossible. There are too many factors at work determining the prices of currencies.
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Features
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Currency prices change depending on central bank policies, international balances of trade and market sentiment. None of these are predictable, particularly when it comes to the major currencies like the U.S. Dollar, Euro and Japanese Yen--the three most common currencies. Learning FOREX traders are best served by developing their basic day trading techniques. Learn about price resistance and how to trade resistance breaks. Do not believe FOREX training packages that purport to tell you how to predict long-term currency moves. If anyone knew how to do that consistently, they would not need to sell FOREX training packages to make supplemental income.
Considerations
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Training to become an excellent FOREX trader requires more discipline than most part-time traders are willing to put in. The movements in currency prices--called "pips" in common terminology--are so minute and so rapid that any trader who wants to make consistent profits needs to have the consistency to watch the charts in real-time whenever they have an open position. As FOREX trades 24 hours a day except on weekends, leaving open positions after you stop monitoring them is asking for trouble.
Benefits
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FOREX trading is most often a specialty for good reason--it requires a different temperament than trading stocks, is very risky and requires constant attention. The most successful traders learn to trade in such a way that minimizes their losses over time. The high liquidity of the FOREX markets makes it very easy to set up successful stop-loss orders. One excellent practice is to gradually step up stop-loss orders as your gains increase. This "locks in" gains in a progressive manner. Practice trading as if it were a full-time day using a free practice account to see how your planned trading system works when exposed to the market.
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Resources
- Photo Credit dichohecho, Flickr
