Part 2 of how to be forex trader from beginner
Now you are all set, so what do we trade? There are 3 basic categories to choose from. These are stocks and options, futures and commodities and foreign currencies.
Let us look at stocks. There are thousands of them. Then there are the exchanges such as The New York Stock Exchange for the big boys then there is the NASDAQ for the internet type younger companies. We also have pink sheets for stocks with low trading volume. How do you decide which stocks to trade.
There are various software packages that screen stocks for whatever parameters you input You can screen for gapers, which are stocks that have gone up or down by a fairly large amount when compared with the previous days close. Then there are lows and highs, unusual volume, earnings reports, other reports that affect the stocks price, sector performance and on and on it goes. It can be a daunting task deciding “how” if you want to trade stocks. What about options? They are too specialized for the beginner in my opinion. Learn something simple and then you can graduate to options if you so desire.
Futures and commodities on the other hand offer the trader a much smaller basket of goods to choose from. I would stay out of commodities if you are just learning. Commodities such as grains, orange juice, coffee and pork bellies etc. require the trader to acquire knowledge about the peculiarities of the commodity. For instance, when is the end of the grain harvest? How has the weather affected the harvest, and a host of other variables. There is an easier way!
When we take a close look at foreign currency trading we see some decided advantages compared to the other instruments already mentioned. Foreign currency trading, commonly called forex, involves the buying and selling of one currency against the other. One of the huge advantages of forex is its’ liquidity, which is the volume of transactions measured daily, weekly or annually. The liquidity in forex is second to none. This is important because it means when you trade you will almost always get your fills.
Can you imagine buying a stock and it starts to dive and you can’t get rid of it because of lack of liquidity! This would not happen in forex trading. Another advantage is its high daily range. This means every day the currencies increase and decrease in price enough to allow the trader to have opportunities for trades every day. The forex market also gives you flexible work hours. All around the globe the same currencies are being traded from almost sunrise to sunrise. You can literally choose when you want to trade.
It is ideal for learning and practice if you have a current job and want to transition to trading over a period of time, or if you want to just trade on the side. One of the biggest advantages of trading foreign currencies is the leverage it gives the trader. This means you can start with as little as US$2000 or sometimes less and start to trade right away. Another advantage is that you can focus on one or two pairs of currencies and really learn to trade them very well because you will get to know them so well. You do not have to wonder which stock should I going to trade today.
Finally the opportunity exists for you to be trained by experts on all aspects of forex trading for a very reasonable price. You do not need to try and reinvent the wheel. It has all been done for you already. Researched, experimented, tried, tested and proven to work.