Posted by forex at 2:33 AM
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Open Brokerage Account
1. Visit the website of any stock or Forex broker to apply for an account. You cannot invest in either market without a broker. Many brokers allow you to demo their trading software (see Resources). This lets you practice your investment skills as well.
2. Complete the online application for a live or demo account with the broker.
3. Download and install the trading software. Or, if the broker is entirely Web-based, log in to the brokerage account with any Web browser.
Study Price Charts
4. Type in the stock or currency symbol you wish to chart into the trading platform and then press the 'Enter,' 'Chart,' 'Go' or similar button. Forex brokers may allow you to simply click on the desired currency to create a chart.
5. Look at the price swings in the chart that the software creates. You will see ups and downs. Temporary peaks in prices are called 'highs' while the end of a temporary price decline is a 'low.' Identifying highs and lows is a fundamental part of investing in any financial product.
6. Compare the most recent high with the previous high. If it is higher, then also compare the most recent low with the previous low. If it is also higher, the stock or currency chart is reflecting a positive price trend. Trend identification is among the most basic but effective ways to find investment opportunities.
7. Chart other stocks or currencies if the current chart does not show a clear trend.
Buy into the Trend
8. Buy the stock or currency if the chart shows an up trend. Purchase immediately if you have high risk tolerance. If the trend remains intact, you will eventually see profit.
9. Monitor the stock or currency if it is an up trend but wait to buy until after prices decline from a recent high. This entry strategy is best for investors with a lower risk tolerance. Because you are not buying the price at or near its recent high, you could enter the trend at a lower price and thus generate greater profit if the trend continues. However, it is possible that prices will not decline substantially, thus eliminating your entry altogether.
10. Sell or exit the position if the trend breaks. An up trend is no longer trending, by definition, if prices decline lower than the recent low. Likewise, if the recent high is at or below the previous high before prices decline, the trend may have reached its end.