Gary Tilkin - The Complete Idiots Guide to Foreign Currency Trading

Table of Contents

Foreign currency trading gives you the opportunity to participate in the worlds largest and most liquid market, known as forex. More than $3.9 trillion U.S. dollars exchange hands daily.

The forex market moves rapidly, with currency prices changing by the second. No single event, individual, or institution can rule this market. Its truly uncontrollable by any single entity because of its large liquidity.

Some traders see very large profits from trading in this market, but always remember that the market is highly speculative and volatile. While you can make a lot of money on a trade, you can also lose a lot on a trade.

Take the time to learn how to research your potential trades using both the fundamental and technical analysis tools we introduce to you in this book. Develop your own strategies for trading and test those strategies using demonstration accounts before you start trading your own money.

Remember, though, you should never trade forex unless youre using money you can afford to lose. Forex is a high-risk endeavor!

You start exploring the world of foreign currency trading by learning how forex got started and how it operates today. Then you explore how currencies differ from country to country. Next, we explore the trading basics. We then introduce you to the tools for trading.

Weve organized this book into five parts:

Part 1, Exploring the World of Money, looks at why you should consider trading forex, then delves into how the forex market got started and introduces you to the language of money.

Part 2, Deciphering Money Differences, gives you the opportunity to learn why currency values change and how the foreign exchange markets work. Then well take a closer look at the safest currencies to tradecurrencies of the developed world. Well also explore the more exotic currenciesemerging nations whose currencies may be worth considering once you understand the foreign currency market, its risks, and how to trade in it.

Part 3, Trading Basics, introduces you to the basics of technical and fundamental analysis to help you research your potential trades. Then we explore how you develop an investing plan and identify trends and trades. Finally, we explore the various risks you must take in order to trade in the forex market.

Part 4, Tools for Trading, starts with the basic computer hardware and software you need to trade, then goes on to explore how you can develop your own money strategies, as well as the basics for actually placing your trades.

Part 5, Trading Options, starts with how to avoid money fraud, then explores the various ways you can trade forex: with mini accounts, standard accounts, managed forex, and trading systems. We then describe how to set up your trading business and how to find the resources you need to operate that business.

Weve developed a few helpers youll find in sidebars throughout the book:

Wed like to give a special thanks to Christine Flodin, whose attention to detail and assistance with all the content in this book helped make this a friendly users guide for our readers. Wed also like to thank our editors at Alpha Books for all their help in making this book the best it can be: Paul Dinas, acquisitions editor; Phil Kitchel, development editor; and Cate Schwenk, copy editor.

Foreign exchange trading involves high risks, with the potential for substantial losses, and is not suitable for all persons. The high degree of leverage can work against you as well as for you. The possibility exists that you could sustain a loss of some or all of your initial investment; therefore, you should not invest money that you cannot afford to lose. Trading programs or strategies discussed in this book are for educational purposes only and are based on hypothetical or simulated performance results, which have certain inherent limitations. Because these trades have not actually been executed, the results may not have accurately compensated for the impact, if any, of certain market factors, such as lack of liquidity. Hypothetical or simulated trading programs are designed with the benefit of hindsight to illustrate strategic trading concepts, but no representation is being made that any account will or is likely to achieve profits or losses similar to the results being shown. Any opinions, news, research, analyses, prices, trading strategies, or other information contained on websites or in publications mentioned in this book are provided as general market commentary, and do not constitute investment advice. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

All terms mentioned in this book that are known to be or are suspected of being trademarks or service marks have been appropriately capitalized. Alpha Books and Penguin Group (USA) Inc. cannot attest to the accuracy of this information. Use of a term in this book should not be regarded as affecting the validity of any trademark or service mark.

Exploring the World of Money

Why trade foreign currency? Who trades it? In this part, you learn the answers to these questions and many more. Youll also take a tour of forex basics.

Youll also learn how foreign exchange trading got started. Its a long story that goes back to Babylon. Todays system of floating currencies is still a work in progress.

The world of foreign exchange trading includes spots (and were not talking about the type you find on dogs), forwards, options, and futures (and not the reading-the-tealeaves type). Find out how all these impact the world of forex.

After reviewing the key money terms, compare forex trading to less risky trading options, such as stocks, to determine if forex is right for you.