If
you want to learn about forex trading, you really should check these out
before parting with serious money.
Bird
Watching in Lion Country
Affluent Desktop Currency Trader
Visit our
blog for lots of useful trading info
Free
Forex Currency Trading Guide
What
You Need to Start Trading at Home ...
... and where to get it.
- Computer
- Internet Connection
- Trading Account
- Software
- Knowledge
- A Little Luck
Computer
You may
have seen pictures or movies involving city traders. They sit or stand
(or jump up and down) in front of their multiple screens no doubt driven
by immensely powerful computers. Actually, what you need is very much
less.
A PC capable of running a current version of Windows will be fine. As
will a single monitor. Some people find it's useful to run a second monitor
too and it is certainly helpful to be able to look at charts without having
to close down whatever else you are looking at (trading account, financial
news, etc). If you want more than two monitors though you're probably
doing something other than just trading.
Where to get your kit? For bargain prices -- and you don't need to spend more than £200 -- the auction sites are hard to beat. If you want an additional monitor then you need not pay any more than £20. What about Apple Mac users? Well, I for one prefer to use Apple, but for financial trading then the PC is king. Some of the the trading platforms run on a Mac but they work better on PC. Of course, users of modern Macs have the best of both worlds, but if you want a machine specifically for trading then a cheap PC is fine.
Internet Connection
If you are reading this then I guess you must be online. A speedy connection is really handy so broadband is the best way to go. Obviously, the broadband market is very competitive and the cheapest is not necessarily the best. You won't want your connection dropping out just as you are closing a position; it could prove very expensive. My recommendation is NDO, or Namesco as they are now called. Their service is extremely good and reliability is high. UK2 is another ISP strongly recommended, inexpensive and reliable; a rare combination.
Trading Account
A trading
account is simply a means for you to access the markets. Here we are using
spread betting to trade the currency markets. It is not the only way though,
you can deal directly and buy what are called 'lots'. A 'lot' is simply
a transaction; using one currency to buy another and the term refers to
the amount of $100,000. Mini lots are also available to trade and they
are one tenth of the value of a 'lot'.
Spread betting has many advantages. The main ones are being able to enter
the market with minimal funds and also the fact that profits from spread
betting in the UK are not affected by Capital Gains Tax. Don't be put
off by the name spread betting, it is simply a way to enter the markets
without taking actual ownership.
There are a number of spread betting websites and all have their own peculiarities and appeals. Most offer a virtual account where you can trade without risking real money. Using a virtual account is a highly recommended way to start. You'll get to know the workings of the trading platform as well as gaining experience in the markets without making costly mistakes. The reasons for choosing one particular trading site over another are mainly down to personal preference. It is a competitive market so the trading costs are usually similar. There is some variation in the spread of particular products and this is the profit that the site owner makes. Certainly, if you are paying more than 3 pips in spread for Euro/ USDollar, then it will pay you to shop around. Some platforms seem easier to use and others offer better support, but because it really is a subjective choice then open 2 or 3 accounts, get to know the platform and use whichever you prefer. You may find it useful to operate more than one account so you can choose the best spreads. As a starting point I would recommend Tradindex for simplicity, IG Index for flexibility and City Index as an all rounder.
Software
What do
you need software for when the spread betting sites have their own analytical
tools? Simply because you can get better information from an independent
source.
You need software to produce the charts you'll use to analyse price data.
You can pay a lot for charting applications, but there is also a way to
get one of the best packages absolutely free. MetaTrader
will give you all the info you'll need as a currency trader and if you
follow the instructions on our blog, you can download it and run it for
free.
You might want to crunch a few numbers with Microsoft Excel but it's not really necessary. What is absolutely vital is that you keep a record of all your trades. You can do this with a traditional diary and pencil, but Excel will make your record keeping easier and more usable.
Knowledge
So this
is the difference between being a successful trader and very often a bankrupt.
There are two aspects to trading knowledge. The first is a knowledge of
the markets: how they move, why they move, when they move, and predicting
all three. It's complex and it's possible to spend a lot of money on courses
and books. You don't need to spend a fortune, much of your trading knowledge
will come from trading itself. You will need some background though and
I can heartily recommend these two: The Affluent Desktop Currency Trader
and Birdwatching in Lion Country. Further trading insights appear on the
associated blog.
The other aspect of trading knowledge is that of knowing about yourself
and how you act and more importantly react when you are trading. Commonly
referred to as Trading Psychology, it is a crucial subject for any trader
to understand. It is very hard to teach and learn because we are all different
and all behave differently under various circumstances. Even your virtual
trading account won't fully prepare you for the real world. It's so important,
you'll find further info in the blog.
A Little Luck
That leaves us with the last requirement. It is tempting to say that if you have all the others then you won't need it. But, that would be untrue. The currency markets, like any market, can move in very unpredictable ways and there are other variables too that can affect your degree of success. You can do a lot to minimize the effects of luck or chance, but you cannot eradicate it completely. If you get a power outage just as your trade moves massively against you then this could be deemed bad luck. However, if you have all the necessary contact numbers to hand so you can exit your position over the telephone right away if necessary then you'll not be taken to the cleaners. Do all you can to remove chance, because if you don't you might as well be putting your money on the 3.30 at Ascot. Currency trading is not gambling if you use all the tools available to you.