| The two main currency trading methods we are | | | | - Japanese Yen |
| going to outline in this article are: | | | | - Swiss Franc |
| | | | Of course, more substantial sums of money are |
| 1. Using Leverage | | | | needed to make this method of currency trading |
| 2. Taking Ownership | | | | worthwhile after taking into account bank transfer |
| Once a reasonable amount of experience and | | | | charges. |
| knowledge has been gained in the currency trading | | | | However, if you have x,000 dollars or euros or any |
| market (FOREX) it can be very profitable to combine | | | | of the big five currencies to commit to currency |
| both methods. Here are the main characteristics of | | | | trading this method is certainly worth considering. |
| each: | | | | After studying technical indicators and learning about |
| 1. Using Leverage | | | | support and resistance and Fibonacci calculations, you |
| Beginners in currency trading will typically find an | | | | will soon recognize key patterns on the higher time |
| online broker, open a free demo account, read a | | | | frame charts. Using daily and weekly charts will bring |
| manual or take a tutorial, and start practicing | | | | to your attention currency pairs that are in an up or |
| speculating skills based on technical indicators. | | | | down trend or pairs that appear to be topping out or |
| Through the online broker they are able to use | | | | reaching a strategic high or low. |
| leverage so if they eventually decide to open a mini | | | | If for example the British pound reaches a high |
| account, a 100:1 leverage means that with $1 they | | | | against the dollar that is the highest it has been for |
| can participate in the market with $1,000. If in time | | | | many years, there is a reasonable possibility that it |
| they graduate to a regular account, 1 trading lot of | | | | will not stay at that level. Taking a portion of your |
| $10 can be leveraged by the broker so $100,000 can | | | | equity and buying dollars would make good sense. |
| be traded for another currency. | | | | Within a few days or weeks depending on your |
| Many newcomers to currency trading concentrate on | | | | profit targets, the pound is like to come down at |
| getting small profits, getting in and out of the trade | | | | which time you sell dollars and buy pounds. |
| quickly, usually taking no longer than a few hours at | | | | For example, with GBP10,000 you purchase dollars as |
| the most. Day trading necessitates learning how to | | | | the pound touches 2.000 against the dollar. You now |
| read candle charts, recognizing patterns, and | | | | own USD20,000. Within a few days the pound pulls |
| anticipating where price is likely to go. | | | | back to 1.9800 at which time you sell dollars and buy |
| As many new traders find when they have been | | | | pounds giving you GBP10,101 less bank transfer fees. |
| currency trading for a while, it is possible to have a | | | | This is just a quick example of how the ownership |
| succession of losing trades, and without proper | | | | method of currency trading works. Of course, the |
| equity management, their account can be blown | | | | currency may not go in the direction you anticipate in |
| necessitating another cash injection to allow them to | | | | which case your equity will be reduced. You will then |
| trade again. | | | | need to hold that currency until such time it increases |
| A series of blown accounts can add up and many | | | | in value. Alternatively, you may see another |
| view this as part of their currency trading education | | | | opportunity involving a different currency cross and |
| expenses. | | | | be prepared to take a loss in order to use that |
| Alternating between a demo account and a mini | | | | capital in a new trade. |
| account can reduce the cost so the new currency | | | | Once currency trading skills have been acquired, the |
| trader can regain confidence in the demo before | | | | ownership method can be quite profitable, especially |
| going back to live trading again. Eventually, the hope | | | | as your equity increases. This method requires |
| is that the trader will develop a consistent trading | | | | patience as ideal setups may not appear very often. |
| pattern so more trades are won than lost so their | | | | But when they do you can commit a reasonable part |
| equity gradually increases. | | | | of your portfolio to the trade with a high probability |
| 2. Taking Ownership | | | | you will profit. |
| This method of currency trading still requires a | | | | Currency Trading Is High Risk |
| learning curve as one has to anticipate the market | | | | Currency trading is viewed as a high risk enterprise, |
| moves and recognize chart patterns. Unlike using | | | | and with good reason. A very high proportion of |
| leverage however, the risk of financial loss is smaller | | | | those who attempt to trade the Forex fail and give |
| and you are not in danger of 'blowing your account.' | | | | up in time, up to 95% according to some authorities. |
| It simply means you create a portfolio with whatever | | | | Other veteran traders suggest it can take from a |
| funds you wish to commit to currency trading and | | | | few months to 3 years to gain the necessary skills - |
| open bank accounts in each of the currencies you | | | | quite a learning curve! |
| wish to trade. | | | | Those who have the psychological stamina and |
| For example, you may wish to open bank accounts | | | | determination to ride the bumps, accept the losses, |
| for any of the following: | | | | and keep coming back until they are able to make |
| - US Dollar | | | | consistent profits, are generously rewarded with a |
| - British Pound | | | | changed financial status. |
| - European Euro | | | | |