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For the first time in history the largest trading market is open to everyone. The trillion dollar/day Forex Online Trading market can be traded on by anyone with a PC, and internet connection. And its not that complicated, but one has to be very careful how he trades, otherwise he can quickly lose all his capital. In this article we’ll go through some of the basics for the beginner, and even the more advanced trader might learn a thing or two.

Decision 1- which trading platform to use there are hundreds of brokers in the market, which means that you connect to them through the internet, and trade through them. Usually each broker has his own platform – how your screen looks, how to track of your funds, etc. When choosing a broker its important to pick a big, regulated company, so that one morning you won’t wake up to find that your company has gone bankrupt, together with your money. Read the about tab on his main menu. It is preferable, but not a must to pick a broker who uses a “metatrader 4″ platform. Since it has become popular lately, many robots are written for it. Some brokers offer free money, but that doesn’t mean too much, as you can’t redeem it, but it lets you enlarge your margin. Pick a broker that gives a margin of at least 100:1 (not more than 400:1). Since we’ll recommend later on working with intraday trades, therefore its important to pick a broker who uses tenths of pips (like fxcm). This decreases the spreads, which is meaningful in intraday trading.

Lastly, always when starting to work with a new broker using his demo platform. Mistakes made by unskilled fingers can cost a lot of money (I meant to buy not sell).

Decision 2- which currency pair to trade trade the majors, i.E. Usd, eur, jpy, gbp, chf, and their crosses. Nothing exotic – they may defy the rules. Try to trade with a relatively volatile currency pair. This is not important if you intend to let a position hold for a few months. But how much can you earn if for example, you bought eur/usd and it went up 100 pips in your direction over a few months? 30 pips a month is not really earning well. It is far better to make a few trades a day, gaining on each one even ten pips. Therefore, if your currency pair isn’t volatile enough you might end up staring at your computer all day. Volatility can change by the day or week, so you should check it before trading, but usually the eur/usd, eur/gbp, usd/jpy pairs are volatile enough.

Decision 3- It’s important when trading in the Forex Online Trading market to decide how large to trade (how many lots). The size of your trade should depend upon 1) the amount of your trading capital 2) the % of your capital that you are willing to risk on a single trade and 3) the size of your stop loss, which we’ll discuss later. Most traders risk about 2-3% of their capital, but you should never be more aggressive than 5% of your capital – otherwise a few consecutive losses, and you are out of business. We’ll e.g. If your capital is $1000, and you want to risk no more than 5% which is $50, and you decide that for this trade 20 pips stop loss is sufficient, then you’ll open a position where each pips is worth $2.5 ($50 / $20).

Decision 4- what about robots? Forex robots (also called expert advisors) cost money. The ones that cost no money are usually worth that much. Robots can be very useful, when trading in the Forex Online Trading marketplace, especially for people who don’t have the time or patience to sit in front of the computer all day. Of course they don’t profit 100% of the time, so its advisable to buy one which has a high percentages of wins, and a refund offer if not. You can find recommended robots at the end of this article. My experience tells me that robots are better on opening the positions, than closing them. The best way, therefore is to let the robot open the position, then monitor the trade carefully, and decide for yourself when to close it – if the robot hasn’t closed it yet. There are all also mechanical systems that indicate to you exactly when you should buy/sell. But you have to be in front of the computer to do the trade, but you have more control.

Decision 5- buy or sell? If you’ve decided not to work with a robot, but rather open the position yourself, then it is extremely important to plan your order. Don’t rush into a trade out of fear that a excellent one-time opportunity is slipping out of your hands. The next thing is to remember the a trend is your friend. Since we’re discussing short-term trading (minutes or hours), you should use the trend seen on the 1-min. To 1-hr charts. Use trend lines. Who cares about last month, when you intend to close your position in a few minutes or hours? Open with the trend. Don’t try to catch it before a reversal, unless you are an expert.

Decision 6- when to buy/sell? Once you’ve to decided whether to buy or sell, you have to decide exactly when to do it. A premature open might cause your stop loss to close your position too early. Here is where technical indicators come in handy. Use a combination of them, not just one. There are many possibilities, when dealing with the Forex Online Trading market, but I will go for a stochastic oscillator, used together with a candlestick 1-minute chart. The stochastic oscillator should be defined to correspond more or less with your chart. Play around with the %k factor, until it does. Once the oscillator reaches over 90, that means that the market is overbought so now is the time to sell. If goes under 10, that means that the market is oversold so now is the time to buy. But don’t buy/sell yet until the candlesticks, also are in your favor. (You can learn about candlesticks all over – use a search engine). When both the stochastic oscillator and the candlestick are in favor of direction you decided using the trend, then buy/sell.

Decision 7- how large to set stop loss always set up your stop loss before you actually open the position. I know a fellow who didn’t, and he woke up the next morning with no money left. There is one school of thought which says make a very large stop loss, assuming that the market will turn in your favor before it actually reaches that point. The only problem is that by using a large stop loss, and staying within your predetermined risk percentage (see decision 3 above), you won’t be able to make large trades and large profits. Also, what happens if the market does hit your stop loss – you’ve had it. Classically, you should set your take profit greater than your stop loss in order to wind up with a final profit. That is taking for granted a 50-50 win-loss rate. But if, for example, you see by experience, that you are having a 65-35 win-loss rate, then you can set your take profits less than your stop losses. This can cause more trades which are profitable.

Once you’ve hit even on a particular trade, if you’re following the trade, set a trailing stop loss of the same size as your original stop loss. E.G. If you originally set a 30 pips stop loss, and the market has gone in your favor 35 pips, set a 35-pips trailing stop loss, and relax – you can’t lose on this trade.

Decision 8- when to close your position if you’ve reached your take profit level, let the position close. Don’t let the position remain open in the hope that it will continue in your favor, because many times the profit you could have earned will be wiped out. A bird in hand…

Even if you haven’t reached your desired profit, but the trading becomes wobbly over a time, that means that the trading can go against you, so its better to quit while ahead. This is especially true when all the trends/indicators that caused you to open the trade, have changed direction.

I’ve tried to give a general outline for the new forex trader.  Of course, there is a lot more to be learned especially about indicators, etc. But when one starts to trade with a demo account, he can fill in all the details as he trades. The easy way out is, of course to buy a high-priced robot, and he’ll start earning money for you in a few hours. Hopefully – nothing in this business is for sure.

Good luck!

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