Back to Back Issues Page
Wading into the Currency Market
August 03, 2014

Wading into the Currency Market


After a rough week in the stock market, some investors are reconsidering the idea of "diversification". Basically, diversification simply means "don't put all of your eggs into one basket". For example, if you swing trade the U.S. stock market, then you don't want your portfolio to be just one or two stocks. And as the market has fallen through several key levels of support this past week, you wouldn't want your whole portfolio to be all long trades either. You'd mix things up a bit, holding various stocks and holding both longs and shorts.

But diversification can also occur across multiple markets. For example, you don't have to trade only stocks. You could consider Futures, Commodities, or Forex.

I'm not suggesting you abandon the stock market. I am suggesting that exploring other markets might be a smart thing to do. In particular, the currency market (what most people call the Forex market) is the largest market on earth and the amount of money that changes hands in this market makes the U.S. stock market look like a minor league player.

But many traders are shy about learning something new. The Forex market seems kind of bizarre. I know, that was my opinion about two years ago, before I started learning how to trade it. But, hands down, the Forex market offers the largest leverage and biggest potential for leveraged profit of any other market out there. Forex also allows day trading without the 25K required for day trading stocks.

While I'm not suggesting you just open up a live account and start trading it right away, I will give you a couple of "first steps" you can take...and it won't cost you a penny.

1. Start looking at some charts. If your broker doesn't offer Forex charts, then you can go to: Free Stock Charts. or Metatrader and get Forex quotes in this way. You may be surprised to learn that they look just like regular price charts.

2. Start learning more about the subject. Here's a free site: Basic Forex School . You can find basic information about trading Forex, learn the language, and that sort of thing on this site. You may not learn enough here to start using real money in your trading, but it will get you started on some basic information. I've also created a short series of videos to introduce you to Forex trading. You can find that series on this page: Forex Information Videos

3. Start understanding the impact of major news events on world currencies. As the world's major economies report on the economic health of their nation, this impacts the Forex market in a major way. The free resource for these scheduled announcements is: Forex Factory . (Red folder events have the highest potential for impacting the markets.)

4. Start paper trading. At the bottom of the page of the following link, you'll see my recommendation for Forex brokers. You need to be a little careful here because this industry is not as regulated as the U.S. stock market. But the broker I mention at the bottom of this page: See Broker at Bottom is excellent. This broker is reliable and meets all of the requirements for being a Forex broker in the U.S. They also have several trading platforms from which to choose.

5. Start following the trends on several pairs. If you're not following me on Twitter, then go to Twitter Page . I made a post today (Sunday) regarding the dominant trends of 12 different currency pairs. These dominant trends are based on the daily and 4-hour charts. As time allows, I'll also post updates on the Twitter feed regarding those pairs.

So those are five ideas to help you wade into the Forex market. None of those steps will cost you a penny. You might find a new market to trade and a new way to make money.

I wish you much success with your trading.



Sincerely,

Bob Joiner

Back to Back Issues Page