Since you have been bitten by the bug about the trillions dollar foreign exchange (forex) market, the first obvious course for you to take is to read up about it. Yes, you may have rudimentary knowledge about it, and it is necessary in order to lose a small of money, rather than a large sum, to learn about it.
There are lots of books available. You need to get hold of a book that covers the entire range of how the forex market operates. There are very many things you need to know about. It’s not like the stock market, where you read from a balance sheet, and the yellow newspapers telling you about investment in stocks. This is a really different ballgame.
For instance, as a starter you need to know about economies of the countries who are in the arena of the currency markets. What makes their currency value lower or higher against another currency. What is fiscal deficit, or current account deficit. How is the currency rated from time to time are questions which are basic. No, you don’t have to be an authority on the subject, but you must have the fundamentals clear. For example, let us say ‘x’ country sees a change in government; if you look up that country’s currency rating or rate against your own country’s currency, you might find that that country’s currency rating has gone down, meaning that now that country’s currency is getting you more currency of that currency, against your own currency! There are very many other factors involved.
So start by buying a grad book about international trade and finance. Choose one yourself after perusing others as well. You might as well buy a book that is recommended reading for finance majors in grad colleges or schools. You might want to take night classes on international finance.
Take the advice of your bankers, investment counsellors or investment institutions, wherever you know someone, and buy the recommended book. Making money is not so easy as it is generally. Why plunge into a pool that is full of sharks, and the depth of which is unknown? So get educated.
Once,remember once, you have done that reading, you might want to purchase software that is available about forex markets. Again, don’t shop around for cheaper products. Choose one that is recommended to you by an expert.
Play with it on a ‘virtual’ market. It is like the games your children use or rather more apt, is like a simulator, which shows you ‘real life’ situations. Play with your money, and watch it grow or disappear. Tinker around, and play it. When you get stuck, look at your book. Online help does not carry so much detail, since its writer can only provide so much information, not all. Use your gut feeling.
Better still, take a day’s quote from the newspaper or your online report from the bankers. Use that info to play with, and see how you come up, the next day on the newspaper. Were you right or wrong? That will give you a shadow trading profile. And if your shadow trading profile matches at least consistently for a week, then maybe you are ready to plunge into the real world. In using the word consistently, what is meant is that your gains should be more than your losses at least 70 per cent.
Find out whether you need a licence. Most countries do not allow individuals to run forex trading. Most require a licence to be procured, because you are playing in a market in which huge sums of money, running into trillions of trillions in currencies, and there may be a minimum capital norms attached to ensure that you don’t lose money, or make other people lose money.
Better to be safe than sorry. In a jiffy you can lose quite a lot of money, and it goes down the ocean of the countries playing with each other in the currency market. In fact, skilled dealers in the institutions playing in the arena are highly qualified, with substantial experience. And you have yet to get to that level. So play safe. Follow the rules outlined above partially, and take advice. That’s free.
Abhishek Agarwal
http://www.articlesbase.com/investing-articles/forex-trading-how-to-make-real-money-703533.html
