A Simple Guide To Trading Forex

This is a simple guide to trading Forex. If you have no or little experience in trading the Forex markets then this will give you a good grounding and will give you some good tips and advice to follow. Never think you have cracked it if you have a couple of consecutive trades on the markets, because trading is a daily battle and you must be on your guard, otherwise the markets will come back and wreak their revenge on you!!

I am taking it as read that you have set up a trading account so that you are ready to trade. Now, taking a look at the various currecy pairings, the 3 most popular trading vehicles are probably the Euro/USD, the GBP/USD and the USD/JPY, and I would recommend you start trading with one or a combination of these.

I would in fact start with either the Euro/USD or the USD/JPY, as although the GBP/USD is very popular it does have a tendency to move very rapidly at times, which when you are starting out can be a bit hair raising. Better to take the more sedate route of one of the others.

So, when you are trading Forex you are obviously going to either buy or sell a certain currency pairing, that is either go long or go short in trading parlance. So you need to decide when you are going to join a trade and which way you are going to trade.

One way to arm yourself is to look at the trading charts that will be available on your trading platform. If you look at these charts you will be able to see which way the momentum is going on a particular currency pairing. It a truism that it is always a safer bet to trade with the momentum than against it.

On the Forex charts you can look at different time scales, with the 10 minute, the half hourly and the hourly time scales being the most popular time frames to pour over. You will see by the direction of the candles, the moving averages that are on the chart, and the stochastics at the bottom of the chart, how the pairing is moving. You will notice that the direction is never in a straight line, but moves in a roller coaster fashion, swinging back and forth, and of course it is this that catches a lot of traders out.

What you need to decide is what direction the trade is currently moving, if it is over bought or oversold (which the stochastics can often give you a clue to), and if you feel that if you, for instance, sell the Euro/USD, the chances are that it will carry on down and the profit/loss ratio is worth trading for.

Place a stop loss on your trade that gives the trade enough room to breathe but not enough for the trade to reverse significantly on you and for you to lose a great deal. You must always trade with money you can afford to lose and never feel under pressure of the trade does not go your way.

You can leave the trade open until it looks like it is going to reverse, and then close your trade, or you can set yourself a target of so many pips before closing the trade, or you can use a trailing stop loss to lock in profits as you go along. Whatever you do, when you are trading the Forex markets, always respect the market, do not take any more risk than you need to, and enjoy!!