Learning to Trade the Forex Market

Getting started

The beauty of forex is you can get started right away without any money and without having any idea what you are doing. To do this you open what is called a demo forex account. In your demo account you trade with fake money and you have fun learning how to trade for real. Your goal is to build a sustainable track record of successfully trading with fake money. Once you have done this you will be ready to try trading with real money.

The transition from fake money to real money can be tricky. Sort of like learning to fly in a flight simulator and then flying a real airplane for the first time. Each time you enter the flight simulator your skills will be improving and your confidence increasing, until you get to the point you feel you are ready for the real thing. In theory, if you master the flight simulator, the real airplane will not be a problem.

In reality, as you're walking toward that real airplane for the first time, your heart will be pumping and you will be scared. Likewise when you are about to pull the trigger on your first real money trade your heart will be pumping and you will be scared.

Flying a plane for real and trading forex for real are similar in many ways:

If you are reckless flying the plane you will get yourself killed. If you are reckless trading forex you will lose all your moneyFlying entails taking off, obeying the rules of safe flying, and landing safely. Forex trading entails entering a trade, controlling your risk, and exiting safely.When flying an airplane your success requires you get all three (takeoff, safety, and landing) right. In forex trading your success requires that you get all three (entry, risk, and exit) rightThe best pilots always put safety first. The best forex traders always put safety first.

Flying a plane and trading forex for real are different in one key way

To become a pilot there is government mandated formal education and professional training requirements; as a result of this formal education and professional training, few pilots crash and burn. To become a real money forex trader there is no government mandated formal education and no professional training requirements; as a result, almost all forex traders crash and burn

Formal education and professional training

Whether you want to be a jet fighter pilot or a weekend recreational pilot of a two-seater, you need formal education and professional training to insure your safety and success. If you want to become a full-time forex trader, a part-time forex trader, or just dabble from time to time you need at least some education and training to insure your safety and success; especially if you're serious about making money from forex trading.

Education choices - getting started

I suggest you start withBabyPips.com; it's described as “a free, funny, and easy-to-understand guide for teaching beginners how to trade the forex market”. Here you will learn about the forex market, forex trading, technical analysis, and fundamental analysis. There is also practical advice on choosing a forex broker and how to go about opening your broker account and getting started with your forex trading. If you prefer reading a book, “Forex for Dummies” is a good place to start. Brian Dolan, one of the authors, is a brilliant guy and he has done an excellent job in laying out the forex basics in easy to understand language. I wrote an article “Forty five ways not to lose money trading forex”, which can easily be located with a Google search; many traders have told me it helped them a lot. You may want to read that one; knowing the common mistakes new forex traders make may be helpful.

As you study the basics, you will likely find the technical tools that you think will suit you. It's a good idea to do further research on those technical tools; three excellent free sources of further information on technicals (and fundamentals) are Investopedia.com, fxstreet.com, and forexfactory.com

Your broker will supply free charting software for you. Personally, I like netdania.com charts; they are very user friendly and there is a free demo version, which I have been happily using for the past 5 years.

Technical tools I use

I love trading. I was a professional forex bank trader for 20 years. I retired in 2004 and have been trading my own account since then. I like to trade everything from one minute charts to daily charts. The technical tools I like best are:

Simple moving averagesRange breakoutsMomentum breakoutsSwingsFibonacci retracementsGartley patternsCandlestick patternsBar reversalsCorrelationsDaily high and low

There is plenty of free information about all of these technical tool available on the internet

Fundamental tools I use

Market view - what currencies are traders focusing on and whyCentral bank speak - what are the key moneymen in each country saying and whyInterest rates - how much interest you get for holding onto a currency mattersEconomic news - the reality of employment, retail sales, and housing matters

A good free website to track all the upcoming important scheduled economic news is forexfactory.com. Kathy Lien is excellent at the fundamentals. Her daily comments can be found at fx360.com.

Where do you begin?

Of course, if you are a new forex trader it takes time to figure out your niche and if you have a job you will need to choose a particular focus of your forex trading. I still think it helps to at least get some exposure to all the tools, both technical and fundamental, that work best in forex trading, and then choose the ones you like. There is plenty of free information on the internet to choose from.

Consider formal education and training

Once you've done your independent study you may choose to try trading forex on your own. If you have the available resources, it may be a good idea to get specialized training / mentoring; there are some good ones out there.

The argument that if a trader was any good he would not be teaching is not without merit. However, there is this to consider. A good trader manages risk effectively. Trading has its ups and downs but getting paid to teach trading is a winning trade every time. Why not do both and improve the slope and the volatility of the earnings curve.
That is not to say there are not a lot of disreputable forex educators out there. Do your due diligence and you can find a good one.

Jimmy Young

eurusdtrader.com

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Daily Financial Market Outlook

Daily Forex Fundamentals

Euro area finance ministers will hopefully today sign off on a second €130bn rescue package for Greece, before a €14.5bn bond repayment comes due on March 20th. This would just narrowly avert both a potential disorderly default and some of financial markets worst fears. However, even if approved, the second bailout is unlikely to be the end of the story. The cost of getting the country's debt-to-GDP ratio down from the present level of 163% to 120% might not be feasible under current proposals and may also in the end not be palpable for the domestic electorate. With unemployment already running over 20%, the approved minimum wage cuts of 22% and planned reduction of the public work force by a fifth by 2015, may leave Greece questioning the price of euro area membership. The situation has certainly left many political leaders around Europe and financial markets participants asking the same question.

Today is a public holiday in the US and there is little in the way of data in the euro area. Euro area data later in the week is likely to be focused on growing strength within the single currency areas 'core'. Forward-looking indicators in the shape of the German IfO survey and the preliminary estimates of February's PMI reports are forecast to rise once again this week. Last week the German ZEW survey posted a sharp improvement for February. We think that the combination of these indicators is consistent with the 'core' euro area countries avoiding recession and will watch for signs of a further acceleration despite the Greek situation.

Key UK data released later in the week includes the 1st revision to UK GDP for Q4 2011 and February's MPC minutes. We expect little revision in the headline 0.2% contraction released in the preliminary estimate for Q4. While the February MPC minutes will provide some insight into this month's voting patterns, which let to an additional £50bn in QE.

Foreign Exchange Market Commentary

The EURO closed higher on Friday and above the 20day moving average crossing tempering the nearterm bearish outlook. The midrange close sets the stage for a steady opening on Monday. Stochastics and the RSI are turning neutral hinting that a low might be in or is near. Closes above this month's high crossing are needed to renew the rally off January's low. If it extends last week's decline, the reaction low crossing is the next downside target.

The YEN closed higher on Friday and the highrange close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI remain bullish signalling that sideways to higher prices are possible nearterm. If it extends this month's rally, the 50% retracement level of the 2011rally crossing is the next upside target. Closes below the 20day moving average crossing would confirm that a shortterm high has been posted.

The SWISS FRANC closed lower on Friday as it consolidated some of last week's rally. The midrange close sets the stage for a steady opening on Monday. Stochastics and the RSI are turning neutral signalling that sideways to lower prices are possible nearterm. Closes below the reaction low crossing are needed to renew the decline off January's high. If it extends last week's rally, the reaction high crossing is the next upside target.

STERLING closed higher on Friday and the midrange close sets the stage for a steady opening on Monday. Stochastics and the RSI are turning neutral to bullish signalling that sideways to higher prices are possible nearterm. Closes above the reaction high crossing are needed to renew the rally off January's low. If it renews Tuesday's decline, the reaction low crossing is the next downside target.

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NZD Jumps as Positive PMI Figures Spark Optimism on FX Market

The New Zealand dollar surged today as the positive reports about China’s and US manufacturing made more attractive currencies related to growth, the New Zealand one among them.

The US Purchasing Managers’ Index increased from 52.7 to 53.9 in December, showing a 29th straight month of manufacturing expansion. Both the Standard & Poor’s 500 Index of shares and the MSCI World Index climbed as much as 1.8 percent today. All in all, today’s trading session was marked by optimism and positive mood. The New Zealand currency profited from that.

The kiwi (the nickname of the New Zealand currency) jumped to 0.7906 against the US dollar — the highest rate since November 14. The NZ dollar reached 1.6499 versus the euro — the highest level since September 12. NZD touched 60.63 against the yen — the high not seen since December 18.

NZD/USD climbed from 0.7782 to 0.7902 and NZD/JPY was up from 59.81 to 60.59 as of 21:55 GMT today. Meanwhile, EUR/NZD tumbled from 1.6606 to 1.6502.