FOREX for Dummies
By Charles Delvalle
Dear Reader,
Last week, I asked if anyone had questions regarding the FOREX (Foreign Exchange) market. And that’s when the questions poured in.
While I can’t cover them all today, I’ll discuss an important question that should give you a good idea of what you need in order to trade FOREX.
Here’s the first question:
Dear Charles,
You said in your column to write, “If you have any question regarding the currency markets … as in how to trade them, how they function, any good deals, anything at all.”
I’m curious about all this. Where do I start?
Thanks.
Glenn C.
Dear Glenn,
The first thing you should do is get a free trading account. There are a few out there, such as www.forex.com or www.fxcm.com.
These places give you a free one-month trial using a $50,000 virtual account. I know FXCM actually gives you some simple training courses for free as well.
After you get your virtual account, you should start researching the FOREX markets. Start finding out how the European, Australian, Canadian, American, and various other economies are doing.
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My tip is to then list these countries in order of who’s growing fastest to slowest. Also list any countries currently raising interest rates. Canada, Europe, Britain, Japan, and the U.S. all stopped. But the U.S. is dropping rates, making them weaker than the others.
From the research I’ve done, one of the most undervalued currencies is the Australian dollar (as I talked about last week when I discussed parity). The fastest growing economies are in Asia (except Japan, which doesn’t grow much). And of course the U.S. dollar is the currency you want to avoid holding on to for the long term.
After you’ve done all of this research and you know what these different economies are going through, it’s time to learn technical analysis. There are a few different forms you can learn. One of the best is actually taught in one of our courses, which you can read about here.
I have no doubt that once you know what’s going on with world economies, and you can learn how to technically trade the FOREX market, you’ll do very well.
Other basic things that you’ll need to know about FOREX:
- You can get up to 200:1 leverage, although I don’t recommend it.
- You can start an account with as little as $300. And you can deposit money from your credit card (although I don’t recommend trading with money that isn’t yours).
- There are no commission charges. The FOREX brokers make money off the bid and ask spread, which is generally very small.
- You never trade just one currency; you trade pairs. So for the quote USD/JPY, the first currency is the base currency (the U.S. dollar) and the other currency is the “quote currency.” This currency pair tells you how much the “quote currency” is worth versus the base currency. In this example, you believe that the Japanese yen will go down in value against the dollar.
- Even though FOREX requires margin, you shouldn’t ever lose more than you put into your account (with the FXCM and Forex.com accounts).
These are just a few of the things you’ll learn when you trade FOREX. Honestly, if you know how to technically trade stocks, then moving into currencies won’t be such a big deal. All you’ll need to learn is the fundamentals of the various currencies involved.
If you don’t know how to trade technically, then start learning.
Next week, I’ll cover some of the other questions I received regarding the FOREX market. If you have any questions about what you just read, contact me at feedback@investorsdailyedge.com.
Good trading,
Charles
Did You Trade the USD/JPY Last Week?
By Charles Delvalle
In last week’s article, I told you that if you were bold, you would buy into the USD/JPY to take advantage of recent dollar strength.
Well, I hope you took advantage of that, because you would have made some decent money. On Friday, the USD/JPY was around 116.912. Today, the USD/JPY is at 117.696.
That’s a profit of 784 pips. Had you put $1,000 into this trade, you’d be up 78 percent (each pip equals a dollar)!
Considering the huge opportunities available in the currency market, you can be sure that I’ll be covering it more in the future.
In the meantime, if you want to take advantage of some of the great trades I’ve been issuing, there is another way to do it.
About a month ago, Andrew Gordon and I started up a new trading service. Not only will you get short and long stock recommendations, you’ll also receive a few options trades every single month.
We also plan on issuing trades on currency options from time to time.
So far, I’ve issued two options recommendations and both of them are up - one is up more than 100 percent in just six days, and the other is up more than 40 percent. All in all, the portfolio is up 24 percent in just under a month’s time.
If you want to check out the next recommendation on my radar, then click here and learn more about Global Profits Hotline.
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