1. A Bigger Market

The forex market is huge, with almost $4 trillion traded on average every business day. That is more than all of the stock markets of the world combined. At the same time, the number of currency pairs available for trading is limited with about 90% of the total trading taking place in 10-20 currency pairs.

Compare this with the number of stocks that can be traded in just one country, and it is clear that the major currency pairs have many, many times the liquidity of any stock. This means that it is generally easier to get the price that you want at the time when you want it.

2. Less Corruption

Another advantage of the forex market over the stock market is that it is almost impossible for a player to manipulate prices. However huge some of the investment funds of the big international banks may be, they do not hold much power individually in a trillion dollar market. It is simply not possible for any institution to control the price of a currency pair in the way that company stock prices can be manipulated. For the same reason, insider trading is not the problem that it is in the stock market. All of this means that the playing field is much more level for the small time home trader.

3.  A 24 Hour Market

Online foreign exchange trading takes place all around the world. From Monday to Friday it is always business hours somewhere, so trading can take place 24 hours a day, 5 days a week. The market is open, in fact, from 4 pm EST Sunday to 4 pm EST Friday. This is great for anybody who cannot trade during business hours in their own time zone. You can get online evenings or early mornings instead.

4. Trade Both Ways

Currency trading is always an exchange of one currency for another. You are buying money, and the only way you can do that is to give another form of money whose relative value will change. This means that you can trade in either direction, going long or going short. While this can be done in some forms of stock trading, it is constant and therefore much more available in online foreign exchange trading.

5. Automation Works

For some reason, the forex market lends itself to automation much more easily than the stock market. Forex robots are created out of all kinds of trading systems and many of them are successful. This is not the case with stock trading. Perhaps it is simply because stock movements are less systemic, depending more on company policy and inside knowledge than technical analysis. In any case, this can certainly be one of the benefits of online foreign exchange trading.

Managed forex allows you to have somebody else trade for you. For anybody who is not an expert in financial trading systems, this is likely to make more profits that you could make for yourself. Of course, you will have to pay something for the service. Even so, most people starting out in forex trading for themselves actually lose money, so paying 10% or 15% of returns to a management company could still end up being a very smart deal.

Of course there is a risk even with managed currency trading accounts. The forex market is unpredictable and companies cannot guarantee returns. In fact, if you see an advertisement promising a certain return, be very cautious. In most cases there will be something in the fine print to explain that returns are not really guaranteed and you may lose money. If not, the advertisement is probably breaking the law unless you are seeing it on the internet and the company is based in a country where the laws regulating investment companies are very loose. Check out such investment opportunities very carefully if you do not avoid them completely.

There are two main types of managed forex investments. The first is the kind we have already described, where the company trades on your account and charges a percentage of the profits. Their percentage may vary considerably because some companies also earn from the brokers. This can seem to reduce the cost to you but keep in mind that sometimes you might not end up with the best broker this way. An unscrupulous manager might have you sign up with a broker who charges a fee per trade and make a lot of small trades on your account to increase their commission.

However, not all management companies behave in this way and this type of forex management means that you can always see what is going on with your account. The money is held in your name and if you are not happy with what is going on you can withdraw it or deny access at any time.

This is very different from a pooled forex account where you pay your money over to a management company who puts it into a pool with other people’s funds and trades it all together. Here you have no control over the account and must simply wait for the results and the payouts. There is a high potential for scams in this situation so check that the company is a member of a respected regulatory body before investing anything in this type of managed forex account.

When speculative forex trading began, after the relaxation of the gold standard which fixed relative currency values until the 1970s, it really only involved banks and other large financial institutions such as fund managers. It was rare for private individuals to be involved unless they had financial connections. Most of the institutions – which are often just called banks for simplicity – would have their own dealing desk where their staff would negotiate with other banks, either on a trading floor in one of the financial centers, or by wire or telephone to other locations around the world. The average Joe could only get in on the act through a broker, and even then, only if he had a lot of money to invest.

So at first the currency market was almost entirely interbank, which means between banks. But then the internet began to take over from the telephone as the main trading medium, and at the same time it became more and more common for average citizens to have a home computer and a broadband connection. Suddenly there was the potential for the average Joe to connect up to the forex market.

Brokers responded to this by creating software platforms which would allow people to log in and manage their own account. This cut costs and made it worthwhile for many brokers to take on clients who were not dealing in hundreds of thousands of dollars, but much smaller amounts. So gradually it became easier for people to trade from home.

More and more of these retail traders have been coming online in the last few years, getting involved in the forex market to make money – or often, unfortunately, to lose it. That is what can happen if a beginner is not well enough prepared for the fast moving and risky environment of the currency trading market.

You still may see the term ‘interbank’ used in a way that includes the whole of the forex market and those who trade it in, but strictly it should not be used that way any more. There is a difference between retail forex trading and interbank forex trading.

Discovering how to trade currency can be lucrative and some people do get rich, but it is a risky undertaking. Forex or currency trading is a form of speculative investment a little like stock trading. You invest in a currency pair that you think will rise in value, then exchange your money back if and when it does, so that you make a profit on the deal.

In fact, when you know how to trade currency you can also sell a currency pair that you think will fall in value. This is possible because all currency deals are a matter of exchange. When you open a trade you are placing an order to change money from one currency into another, but without ever taking delivery. You change it back the other way to make money.

Currency values depend on the economic performance of individual countries. However, most forex trading systems are based on analysis of charts which tells you which direction the price of the pair is moving. If you have a system that can identify when a price is beginning to move in either an upward or downward direction, you can open a trade and ride the trend. The benefit of this is that you do not need to understand a lot of complex economic detail.

However, systems do need to be tested. You may have paid something for a system or read it in a book or ebook that had very good reviews, but you still need to check it out in practice for yourself before you start risking any real money. Different people operate systems in different ways. You will probably also have a different broker. These factors can make a difference.

Fortunately, brokers cater for people who are just learning how to trade currency by providing demo accounts. In demo mode you can place dummy trades, using real live prices. It is a little like using a ‘play’ version of the system. You can test out the broker’s services and test the performance of your system at the same time. This is a great way to trade.

Of course you do not want to stay in demo mode for ever or you will never make any real money. Sooner or later it will be time to make the switch. When you do, it is best to start small. Keep your position and your risk low, and always set a stop loss so that your trade will automatically close out when the price goes against you. It is important to understand that no system is profitable all of the time. Some trades will inevitably lose, and a stop loss will help you minimize the amount of the losses.

Like any useful or money making skill, successful forex trading is not mastered overnight. It is necessary to get to know the market and the basics of trading. But if you can do this successfully, knowing how to trade currency can bring you a lot of satisfaction and hopefully plenty of money too.

It is possible to find study courses and seminars offline, but pretty much everyone prefers to choose an online forex trading course. The prices can vary enormously but usually they are cheap by comparison with offline seminars, and you get a lot of information. You will usually receive an ebook that you can download instantly and either read online or print out to study later. This is very convenient because there is no waiting.

Your online course may include other elements too, that cannot be included in a printed book. For example, in some cases you might have access to a private forum where you can ask questions and chat with other traders who are taking the course. If this is not provided, then at least you will have some method of getting support for anything you do not understand. You will be able to log a support ticket and you can expect to receive fast support from the author of the program or a staff member.

Often you will have access to video training which allows you to watch over the shoulder of a trader so that you can see example trades happening in real time. If a picture paints a thousand words, a video can take the place of ten thousand words in many cases. There is nothing to beat seeing the system you are planning to use, actually working in action before your very eyes.

Of course, all of this is available to you whenever you want it. There are no scheduled classes to attend. If sometimes your forex course might include a webinar (an online seminar) or conference call, it will almost certainly be recorded so that you can listen in later if you are not available for the live event.

Forex trading courses are usually very practical in their emphasis. You can expect to learn at least one practical trading system that you can put into action and make money with. Of course you should test it in a demo account first, but if it does not appear to be successful for you, you should be asking questions to find out what went wrong. You could not get this kind of feedback if you just went out and bought a book.

If you have some experience with forex trading, you will probably find that you are already familiar with some of the material. In this case you can skip through to the parts that interest you. Understand that the author has to provide enough basic information for a beginner to follow, and try not to become impatient with this. You may find that as much as 90% of the course material is information that you already know. That does not matter. The remaining 10% that is new to you could be hugely valuable for you. Concentrate on that and you will still get great value for money from your online forex trading course.

The best way to start if you want to make money with global forex trading is to concentrate on not losing. That may sound obvious but it is important. Many people start out with dreams of becoming rich almost overnight or giving up their jobs to become a full time forex trader. That can happen but only if you start out small. It is very important not to risk too much in the beginning.

New traders will find that the market is only predictable to a certain extent. Even the best forex trading system will make losses from time to time. It is vital to allow for this. You may be lucky at first and have a good run of money making trades but do not become over confident.

Fortunately, most brokers offer a demo account so that you can try out their services risk free. This also gives you a chance to become proficient in trading before you go live with real money. You can test systems and find one that works for you.

When using a demo account, try to act exactly as you would if your real money was at risk. This will help you discover a profitable system that you will be able to operate comfortably in the real global forex market. Minimizing stress is important when you start to trade forex for real because high levels of stress often lead to bad decision making or mistakes.

The global forex market is open 24 hours a day Monday through Friday. It operates in so many time zones that the whole 24 hour period is covered. It is truly a worldwide market in that you are not restricted to trading in your own country’s currency. You can trade any currency pair that your broker offers. In most cases you can even open accounts with brokers in other countries if that suits you, although local laws vary on this. Some brokers operate international offices and will want you to sign up with their office in your own country. Nevertheless, it is a market that is very free of boundaries.

The 24 hour market is an advantage for many people in other ways too. For example, it means that you can trade outside of business hours. This gives you much more flexibility than with stock trading, for example. The global forex market allows you to trade in the evenings or early mornings, fitting around the other activities of your day.

But even with a demo account, it is important to take your trading seriously from the start. Here are 3 pointers that will help you make money with any forex trading system.

1. The One Trade Rule

It is best to open trades one by one. Even for an experienced trader, it is important not to have too many trades at risk at the same time.

This does not necessarily mean that you only ever have one trade open. If you have a trade that is in profit and you have moved a trailing stop beyond the entry point so that this trade cannot lose, it is possible to open another. But it is important to have moved that stop.

Always keep in mind that some unpredictable event such as a natural disaster, war or sudden death of a political leader could throw the whole market into confusion. Or what if your phone lines go down and your internet connection is lost?

2. Risk: Not Too High …

Risk management is vital for successful currency trading. You can succeed without being the perfect technical analyst but you cannot make money with global forex trading without understanding risk management.

If you are risking too much on each trade then at some time or another your funds will be wiped out. All systems have their ups and downs and if your risk is too high, your account balance will not be able to recover from the downs.

3. … And Not Too Low

On the other hand, if your leverage is too low, you will not make much money even from a profitable system. And if your stop loss is too close to your entry point, it will be triggered too soon.

So risk must be optimized for your system. It depends on drawdown and average profit or loss per trade, but a good rule of thumb is to risk between 1% and 5% of your funds on each trade. Only take the higher figure if losing your entire balance would not be a disaster. Generally, the more money a trader has in their account, the more careful they are with it.

Some traders consider that having a set risk per trade is too inflexible and the risk should depend on the strength of a signal. That is fine as long as the variable risk is still defined according to the system. What you want to avoid is varying the risk depending on intuition, or depending on the result that you had from the last trade. That is a recipe for disaster in global forex trading.

1. Funds

While it is true that you can get started with FX currency trading with just a few hundred dollars these days, it is obvious that nobody operating a tiny account is going to make a lot of money in a short time. 10% return on investment per month is an excellent result, but if your balance is $1,000 this would be just $100 per month – not quite enough to retire to Florida for the rest of your life!

If you are starting out with just a small investment, understand that you will need to grow it slowly at first, and reinvest all of the profits. The alternative is to take huge risks and almost certainly lose it all. Your funds must be clear money that you do not need for anything else, because you are not going to be touching them for a few years.

If you are in the fortunate position of having a large amount to invest in FX currency trading, it is still wise to stay small to begin. Start in demo and when you move to real money trading, start small. Many big time traders keep their risk per trade below 1%. When you have a large fund balance, you will want to take extra steps to protect it.

2. Trading System

If you are going to trade for yourself rather than using a managed account or a robot, you will need an FX currency trading system. The best systems are usually simple. Complex systems only confuse things and lead to fuzzy signals and mistakes.

The worst thing that you can do is keep switching from one system to another. Instead, take two or three systems that have good reviews and test them for yourself. When you have found one that brings you consistent profits in both back tests and demo trading, you should have complete confidence in it. You will then be able to stick with it through bad times and good times.

3.  Mindset

The last essential requirement of a successful FX currency trader is a cool head. Do not underestimate the importance of this because it can make or break your trading performance.

We all like to think that we are calm, rational people but the stress and pressure of forex trading can cause all kinds of unexpected reactions. Do not assume that you will never react emotionally to something that has happened during your trading. Instead, recognize that stress, fear and panic decisions are pretty much inevitable and it is how you deal with them that counts. Taking time out at the right moments can help you to stay cool and keep you making money despite the stresses involved in FX currency trading.