There are entire library sections full of books that claim to offer a forex manual for successful trading. But truth be told, the only thing that’s really required is a little bit of first-hand exposure to the forex market. Of course, the books do help with clarifying basic concepts and giving new traders a sense of direction. So take a look at this basic information and guidelines.
Let’s start with the fact that the forex marketplace can’t be found located in the block around the corner, or around any corner. That’s because it is just a distributed global collection of large financial institutions who trade and set currency rates. Forex traders earn money by speculating on the relative values of specific currency pairs.
To be a forex trader, one has to open an account with a broker. This margin account usually needs a minimum opening deposit of $1000 or $2000. But unlike the stock market, forex traders have a massive leverage to play with. The amount available for trades on a new margin account with minimum deposit is usually one lot, which is $100,000.
These amounts may seem scary big for a new trader, but the risks are much lower than the stock market. Pick up any forex manual for successful trading, and it will say that all that’s required is to trade based on know-how and logic, instead of giving in to emotions. Even so, it’s better to keep the total amount of trades to less than 20% of the margin account. Individual trades should be no bigger than 5-10% of the account.
Even better to start off with a demo trading account and do paper trades instead of risking money for real. Choose a forex broker who offers a demo account. Use the account to clarify concepts like how to place a trade with the broker, how much of a spread the broker takes, and how many pips of gain that leaves for the trader.
This is also a good time to understand trading strategies, systems, signals and indicators, and forex derivatives and futures contracts. One very important thing which most forex training schools neglect is to teach traders to focus only on a few specific currency pairs. Good traders spend entire lifetimes tracking one or two currencies.
Given the complexities of currency variations and the large spreads charged by brokers for fringe currencies, it is better to focus on popular and stable pairs like USD/JPY, EUR/USD, USD/CHF and GBP/USD. This information can’t exactly be labeled as a full forex manual for successful trading. However, it is enough to get started in the right direction.