Posted by forex at 7:43 AM
Read our previous post
1. Open a FOREX brokerage account. However, do not rush to fund a live account with real money. Instead, open a demo account with a broker first. This lets you test drive the broker's trading platform for free for a limited time. While you do this, you also get to practice your FOREX trading strategies risk free, since all demo accounts use simulated investment capital. Thus you can mirror the real trading experience in every aspect except for the risk of using your own money. When the demo expires, you can open another demo with any of dozens of established FOREX brokers. You could simulate indefinitely in this way until you are ready to trade with real money. It is crucial that you are confident in your strategy, with proven simulated results, before you commit actual trading capital.
2. Create a FOREX price chart in the trading platform and switch it to 'candlesticks' if it is not already configured to display in this style. Candlesticks are like bar charts, but they emphasize the opening and closing prices of each bar by drawing obvious rectangles, called 'bodies,' in the center of the bar. One way to get started in FOREX trading strategies is to familiarize yourself with the many different candlestick patterns you might see. For example, a 'hammer' candle forms when the Open/Close body is short, but the bar extends through many prices below the body. Such a candle demonstrates that traders attempted but failed to establish a lower exchange rate for this FOREX currency. Thus, higher prices are often imminent after a hammer candle. Dozens of other similar candlestick patterns exist to help traders predict future prices.
3. Compare consecutive highs and lows on the price chart. A high forms when price rises then falls, leaving a peak, or a high. A low forms after a price decline and then a reversal towards higher prices. An important strategy is to identify when these highs and lows are rising, indicative of a 'trend.' A price trend in any market is often a solid move that may continue indefinitely. If you see a series of 'higher highs and higher lows,' this is strong up trend. At the very least, you should take extra caution if trading against the trend. More commonly, traders attempt to buy at an opportune moment and follow the trend for higher prices.
4. Open a FOREX brokerage account that provides low leverage when you are ready to trade with real money. This is important for new traders who are just getting started with trading strategies. Leverage is the ability to buy more assets than your actual trading capital allows. The FOREX market is highly leveraged so traders can profit from small changes in exchange rates. However, this can be disastrous if the strategy is flawed. For this reason, use a 'micro' FOREX account to minimize losses while you test your strategies using real money.