To trade successfully you also must have good charting software and instantaneous data feeds critical to helping you analysis and interpret the movement of currencies moment to moment so you know when/why to buy or sell -- this you subscribe to monthly. You can get a 2 week or more demo to familiarize yourself with one that has the features you like. The costs also vary, and some companies require a year commitment. There are some free charting services offered through the clearinghouses, but they tend to lack the tools to be truly useful. There are also some costly proprietary Specialty Software charting 'hybrids' which are market forecasters tools that look more like video games than charts.
Explain More About How Clearinghouses Work
A good clearinghouse (i.e.. your computer access/link to the live Forex Exchange Market) is the partner with which you trade the money you have deposited with them in your trading account. After trying and demo-ing many we have found a small handful that are truly excellent for the beginner (and continue to be excellent as you grow) -- meaning user friendly, legally accountable to regulatory bodies, and offering fair costs (spreads) for their services/trading software platforms. There still are many worrisome ones practicing in this closing era of unregulated forex trading (new Commodities laws are imminent).
The topic of matching the right clearinghouse for your needs is discussed more in Tools of the Trade, because it depends on a number of factors -- how much you can open an account with, how much the clearinghouse profit spread, what your liquidity needs are, your minimum/maximum stop loss and margin requirements, even where you live and how much time you have to give to trading in a 24 hr. day.
How Much Does it Cost to Begin to Trade?
Learning to trade will entail the cost of books and whatever training method you choose. It will also include a reliable computer with a minimum 128 Mb of memory to run the charting software and trading platform. Ongoing 'costs of operation' include the monthly costs of high-speed internet, charting software, the email forecasting subscriptions -- plan on spending $150./mo. up for ongoing costs.
What about Pooled Clearinghouse Accounts to Trade with More Leverage?
We strongly do not recommend pooled accounts in any circumstance. Perhaps you are considering self-trading a pooled- together family account because it would give you a perceived advantage of more leveraged funds to trade (50:1 up to 100:1 leverage) -- any risks of loss represent a potential risk to family relationships, and for this reason alone we do not recommend aggregating with family or friends.
However much worse are the too-numerous negative experiences of people allowing their investment funds to leave their control to become part of a 'managed' pooled account. Not only is it a very risky investment idea, it is illegal for anyone to 'pool' accounts without compliance with SEC (a USA Securities Exchange Commission) or international equivalent license. Never relinquish direct control over your money/trading account to anyone (i.e.. the ability to make withdrawals, deposits etc. directly by your own authority into your own account).
A good fund manager, if you do choose to go the (legitimate) Managed Account route rather than the Self-Trader route, will make certain you have your own 'segregated account' in your own name in a bank or brokerage firm. These individual segregated accounts can still be traded together as though they were in a single account by a designated trader as long as the clearing house uses a trading platform that allows it. You, as the investor/account holder, have direct access online to your account activity at all times, and direct control over your own account in your own name (just like a bank account). The importance of this, for the safety of your funds, cannot be over emphasized.
Questions From Our Email Inbox
Thank you for inviting people to learn from your experience. I found that to be very generous. I was hoping you may be able to shed little light on just how to go about finding the right currency pairs to buy.
This is where charting software will make it self-evident for you to know what pairs are 'trending'. Technical analysis using charting software: Elliott Wave, Retracements, Fibonacci patterns, short term trending, etc. Good charting software is invaluable! Look at it as one of your 'costs of doing business'.
I have just begun learning how the FOREX works. There are so few opportunities for the lower economic class to achieve financial independence.
It took us a full year to learn to trade forex to achieve consistent profits, but well worth the time and effort. Forex trading can be the great leveler of the self-investor playing field. I and we believe that with dedication to sound, risk-management trading methods you can succeed.
I'm trying to build a financial base, but I just can't find a door in. Is it possible for me to participate directly in the FOREX with smaller amounts - like $1000?
Beginning with $1K. is more of a challenge and more of a risk (but not impossible). $1K represents 1 lot in Forex Trading, and that is the minimum (leveraged) trade that can be made. Perhaps that $1K would be better spent on trading education?
I have participated in Forex 'Games' and other types of online investments that claim to be investing in Foreign Currency (among other things), with returns of 50% a month and more. I actually did get paid. Opinions please?
We strongly urge you to resist any further temptation to send your money away to an investment-type pool (by this we mean do not send your money away to be under someone else's control and in someone else's account). It is unjustified risk, there are much better ways to begin to experience profits from forex trading. Many such online investments have totally disappeared into the Internet ethers from which they came. Typically these investments give no contact information, claiming to be 'offshore', 'for privacy reasons'. They last a few months, their bulletin boards or email newsletters extoll their climbing numbers of 'members' and pay-outs, then without warning their site goes off-line forever. And you never knew who they were that disappeared with your trust and your money or e-gold.
How do you forecast which currency is next in line to increase?
It is not so much that you want to know when any one currency is going up. You can make profits whether a currency is going up (buy), or down (sell). All Currencies are continually rising and falling relative to other currencies, and forex trading is in fact trading one currency relative to another. Good trading opportunities are always present when you know how to recognize them. Technical analysis using charting software, market sentiment, experience will show you which currencies to pair to trade. Forex Trading is a skill of identifying (and acting on) the probabilities.
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