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Beginners Start Here: Forex Trading Fundamentals
09/15/2007 12:00 am EST
Moderator Chris McMahon, associate editor, Futures Magazine, led a stellar group of forex pros through their paces, as they gave forex attendee valuable tips on how to get started in the forex markets.
McMahon first asked the panel, 'Why has forex grown so much in the last several years?'
Brian Dolan, director of research, Forex.com, commented that forex has many advantages for traders: The market's 24-hour accessibility, available leverage, the ability to trade easily, a quick learning curve, and the ease of choosing between just a dozen or so currencies available to trade, rather than having to pick among thousands of stocks.
Joe Trevisani, chief market analyst & partner, FX Solutions, agreed, noting also, that for retail investors, the forex market-in terms of access to available information, is 'more equal' than the stock market.
When asked about the risks of forex trading, the panelists were unanimous in saying that traders-particularly, those new to forex, must be wary of using too much of easily-available leverage.
Ashraf Laidi, head FX analyst, CMC Markets, warned traders to use reasonable margin-put no more than 20% of your trading account in one position.
Marilyn McDonald, marketing director, InterBank, advised attendees to be careful both of overtrading and over leveraging your account. She also wanted traders to know that 'a margin call is not a valid stop loss strategy'.
The panelists had additional tidbits of wisdom for those new to forex trading:
Brian advised that traders limit their exposure, noting that you don't need to be in the market all the time. Instead, wait for the right opportunities.
Joe recommended that you set your risk parameters before you put a trade on and then stick with your original analysis of your trade. In most cases, your analysis should remain valid throughout your trade. And be methodical, keeping track of both your wins and losses, as well as why you won or lost.
Marilyn suggested that you create your own trading plan; seek education; take a demo account from several sources; then test the platforms. Finally, place your money with the broker with whom you feel most comfortable.
Ashraf advised traders to ask their potential broker: Is your company regulated; how long have you been in business; do you really guarantee that the spreads are fixed; how many pairs can I trade; and what are your policies with margin calls?
Wrapping up the session, Chris noted that traders could find a great glossary on his magazine's Web site-futuresmag.com. The rest of the panelists offered additional educational resources, including forex.com, fxcm.com, investopedia.com, forexfactory.com, wsj.com, ft.com, and Brian's book, Currency Trading for Dummies.
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