A basic Forex trading education is necessary to understand how this giant financial market works. Many Forex trading courses won't deal with all the realities of trading.
My intention is to share with you, with as much honesty as possible, my perspective. Nothing to gain or lose by tricking or misleading you in any way, goal is simply stated, is to help you become a better trader.
You have to understand all the players, as well as the tools and methods they use to trade successfully.
Start with learning about The Market. You need to have a clear understanding of what comprises Forex. This knowledge will give you the "big" picture of why the market works the way it does and who the regulars are in this game.
Knowing the Market Players will help to give you the correct perspective as to how you fit into the market. You need to appreciate that your account is more likely to be affected by the Bank of Japan (BoJ) selling $10 billion worth of Yen, than the BoJ is going to be affected by your selling of a $100,000 lot.
You also need to understand the Common Terms used to describe the items, actions and transactions used in the trading process. If there is talk of "something" going on... you'd best understand what "something" is and what it's implications are.
The extreme size of Forex, as well as it's necessity as a component of international trade, make it one of the most Volatile and liquid financial instruments on the planet. The loose translation of this is prices can and do change drastically in very short periods of time.
A big part of your Forex trading education is you must be able to anticipate when these spurts of volatility are likely to occur, or you'll probably get run over in the stampede.
The other side of the "double edged sword" of volatility is Leverage. The ease of falling into an over-leveraged position leaves you very vulnerable to the disastrous combination of having too much money on the table while prices are wildly changing. This has destroyed more trading accounts than you can imagine.
Price movements or changes are the result of various factors. The spot price at any point in time is a reflection of what the overall market believes is fair value. Buyers and sellers "agree" on the transaction price, albeit on an instantaneous basis through their online systems. One thing is for certain, prices never stand still in the foreign exchange business.
The Human Factor is a big unknown that you are forced to deal with. There is a portion of it rolled into all the other aspects of trading. It's effect is exactly why the market can never be predicted.
Human emotion is the ultimate driving factor. Knowing how to control yours, while witnessing that of the others, will ultimately determine your success or failure in this game.
Like any other profession, there are tools to assist you in making your decisions. The main tool should be your Trading Plan. You need to have this in place to aid you in making your trading decisions. In the heat of the action it's good to have a reference to refer to.
You can't emphasize enough the reality of risk in trading. Even with a "perfect" system, there is real and possibly even likely chance something will not go as you expected. If you haven't already visited the risk page, take a moment and review Your Forex education is crucial to your success as a trader.
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