So you have probably already heard about Forex and you most likely can see its money making potential. Next you will wonder, how can I get started to begin seeing huge profits from this thing called Forex? If “Joe the (Farmer, Plumber or Caveman, pick one that doesn’t offend you)” can make millions trading Forex online, why can’t I do that too? Read on if you want to be (plowed, plunged, or stoned, again pick one that doesn’t offend you) in the right direction for success.

This article will tell you what you need to do in order to learn Forex trading and get started on your way toward making your first dollar trading Forex online.

If you want to succeed at Forex you first need to learn, and then always, always, always make educated decisions that are not based upon impulse feelings about the market. Also you should avoid making the speculative decisions that could result in huge losses. If you have difficulty keeping your impulse buys and sells under control, you may also want to consider using an automated trading software that makes all of the critical buy and sell decisions for you.

Choosing a Broker?

With the abundance of Forex brokers available on-line, how will you know which one to pick? Simple. Below, I’ll tell you exactly what to look for to find the best trading platforms. In addition to outlining and explaining the key criteria that you should be looking for as you search for a broker, I’ll also make a simple recommendation for an easy to use, Forex trading platform that you can select with confidence, knowing that you will be getting a good value for your investment dollars.

Take Note Of Tips – Make absolutely sure that there is a great learning Forex trading section on the brokers website that you are considering. If the training materials are not very good, one can only imagine how the customer service will be if you should need it.

Practice Account – Make absolutely sure that there is a practice account so that you can learn Forex trading without using your own precious money. Make a big gain, and suffer a big loss with pretend money first before you ever try putting your money on the line.

Broker Customer Service – If you ever have trouble with your account or have technical difficulties, it is important that you can reach customer service quickly. With active trading occurring in Forex 24 hours a day, 5 days a week, you need to be able to get immediate customer service to solve your problems; make sure they are available 24 hours a day while trading is active.

Investments are a way to ensure that you will have money in the future when you need it. Many people depend on their company retirement plans or Social Security benefits as retirement income. Company retirement plans may not be there when you need them and your Social Security benefits may not cover the standard of living you want to maintain.

Putting your money into a savings account is safe but will yield low interest. If you want your money to grow at a faster pace, investing is the way to go. There are several ways to invest your money. You have to determine which is best for you.

Before you start investing, you should take a look at your current financial situation. Get a copy of your credit report and review it. If there are any negative items or errors on it, get them cleared up before you start to invest. Once you start investing your money, you do not want to have to take money to pay off debts or to stop completely.

What are your monthly expenses? You should eliminate expenses that are not necessary. If you have credit cards which currently charge a high rate of interest, you should pay them off and get rid of them. You can exchange your high interest credit cards for ones with a lower interest rate. If you have any high interest loans, you should pay those off, too.

If you are having a problem meeting your necessary monthly expenses, you should wait until you are in good financial shape before you start investing. Enhance your financial situation with good investments.

Educate yourself on investment strategies and the types of investments before you start. You will have decisions to make. You will want to decide between a discount broker and a full-service broker. A discount broker does exactly what you tell them to do. A full-service broker does research and makes recommendations. You may also think about obtaining the services of a financial planner. A financial planner can help you to develop an investment plan based on your goals and the time frame you set.

You have to determine how much you are willing to risk and how you will invest. If you want to make a lot of money fast, you will be interested in high risk investing. If you are investing for your future, you want to make investments that will grow over time. There are basically three types of investors:

  • Conservative
  • Moderate
  • Aggressive

A conservative investor does not want to take very much risk. They want to retain their initial investment. This type of investor usually will invest in common stocks, bonds, and short term money market accounts. They will have at least one interest earning savings account.

If you decide to be a moderate investor, you will invest part of your funds in common stocks, bonds, and short-term money market accounts and the rest in more, higher risk investments.

As an aggressive investor, you will put more money into high risk investments. Most of your investment funds will be in the stock market.

The type of investments you make will be determined by your financial goals and tolerance for risk. Before you make any investment, you should do some careful research. You should never invest unless you know what you are getting into.

The overall purpose of investing is to create wealth and security over a period of time. You want to have money available when you retire.

With the forex markets there’s a variety of opportunities for investors big and small. Moreover, it has opened up avenues of self-employment. Online trading platforms are easy to use. However, developing a few strategies that work is important for any investor venturing into the market. Forex trading requires a great deal of discipline to begin with, and is an art that takes time to nurture. The idea is make use of demo platforms and develop a feel for the market, prior to trading with real money.

One of the most important strategies is to manage your time and money efficiently. Once you are able to master this you will be in a better position to adopt an appropriate trading strategy. Geographical locations of forex markets permit trading 24 hours a day. Being alert and trading during peak hours will help you to develop a trading strategy.

As far as money is concerned, you need to look at reducing your leverage, which permits better risk management. Large investments do not necessarily indicate bigger profits. If you want to earn a certain profit percentage per day based on your account balance, you may not need to use the maximum leverage available.

There are other reasons to have knowledge of foreign exchange markets, maybe you send money exchange worldwide for your business. It pays to have a good understanding of the many factors that can move rates during the time your looking to send money overseas.

For the long and short of it

The forex market typically follows two patterns, tiny fluctuations, and strong oscillations. As an new entrant into the market, your strategy needs to be based on either of the two. If you base your strategy on day trades then you need to ignore strong oscillations that may occur due to strong economic factors. The opposite works for those traders that focus on strong oscillations. Once you are well experienced you can experiment with mixing long and short term strategies. Modifying a strategy will help reduce your win/loss ratio.
Mixing strategies

Trading strategies are useful for traders to develop a better approach for trading on the FX markets. Developing a strategy with the help of tools such as charts and signals, and trading software will help you to minimize losses. However, tools and tactics aren’t the only means to develop a strategy. You need to maintain your composure at all times, and take each trade your stride. Using long-term as well as short-term trading strategies can only result in bigger losses. However, two trading systems can be mixed in order to reduce possible losses, but not as a method of increasing profits.

The idea is to take advantage of all the tools available. However, with time you need to build up a firm foundation and understanding of the fundamental principles of forex trading. Attending an online course and reading up on all the material available will go a long way in helping you perfect trading strategies and develop a firm understanding of how the forex markets operate. Forex trading should be treated as an investment just like a business venture, which comes along with its set of successes and failures, and you will soon become a seasoned trader in the near future.

In my last post I covered the investing strategy of Benjamin Graham, a renowned investor who managed huge success with growth shares. Further to his ideas, let me run through a strategy based on defensive investing.

Graham insisted upon certain criteria for the stock section of the defensive investors portfolio. I have listed them below, adding my own reasoning to why they remain good practice.

(1) Adequate though not excessive diversification- 10-30 companies. Diversification is very important- simply not putting all of your eggs into one basket. No matter how stable the company selected is, there is always an inherent risk of a highly negative unforeseeable future development, hence buying 10-30 of these companies means that you can afford for one or two to drop. BP is a fantastic case in point- the company looked in great shape, yet had you invested exclusively in it, your portfolio would have lost around half of its value. Yet had you owned a portfolio of 20 large companies, one of which was BP the half drop in share price would mean a loss of 2.5%- far more manageable.

(2) Companies should be of sufficient size. Graham suggests $1 billion – £1billion would probably be a reasonable marker for UK stocks.

(3) Earnings Stability. Graham suggests all suitable companies should have delivered some profit for each of the last ten years. Of Grahams criteria, arguably this one of the most important- if a company is not consistently profitable it is likely a very poor investment, and certainly one that is not suitable for the defensive investor.

(4) Record of continuous dividend payments. Record should extend for at least ten years. It is very important for the defensive investor that they can reasonably expect dividend payments to continue- large companies that claim it is in the shareholders interests for the profits to stay entirely within the business are often in serious trouble.

(5) Some growth in earnings. Graham insists upon a minimum increase of 1/3 in earnings per share over the last ten years, calculate using 3 yer averages at the beginning an end of the ten year period.Such growth earnings is actually very modest- an annual return of just under 3%. We should probably insist upon a 50% increase over the last decade- still only 4.1% average annual growth.

(6) Moderate Price to Earnings ratio. Graham recommended that the defensive investor should not pay more than 25 x average earnings over the last seven years for growth shares- the “last seven years” bit is very important as it would exclude most highly speculative growth shares, as it insists on at least a moderate track record.

(7) Moderate ratio of price to assets.

(a) Current price not more than 1.5 x Net tangible assets per share

The first of Grahams “price to assets” criteria ensures a defensive investor does not purchase shares that do not hold significant underlying value. This criteria was designed for traditional investing activities, and it may be hard to find growth shares priced so moderately in comparison to their assets. However, I will include it, as it still certainly a good sign if a share meets this criteria, as it offers something of Graham’s margin of safety.

These criteria are in no way guaranteed to be the most successful- do not simply go out an buy all of the stocks meeting this criteria. Graham designed it to protect defensive investors from severely overvalued shares, and to provide a list of stocks from which investors could select.