Some of my friends who knew about my involvement in Forex trading have been asking me questions about how to get involved in the trade and what are the things they need to be in lookout for. I thought it would be better to have them listed down in here so it would be helpful to them and all the others who want to get involved in the trade and want to know the basics about how to get started with it.

If you dont have any experience with regards to Forex Trading, if margins, leverage and pip sound like greek to you, you can read the following articles to get an idea about what the forex trade really is.

• External resource material for Forex Trading
• What is Forex Trading?
• Terminology used in Forex Trading
• Why trade Forex?

First of all remember that there is no sure fire way of being successful at forex or any other types of trading for that matter. If there was, there wouldnt be a trade. But there is a Dicta Boelke to forex and almost every trade. Its possible to gain large profits just by chance and if you dont really know what you are doing, in a matter of seconds you can lose all that. On my first day in forex, I made a proift of 200% with a 300$ investment. Its only a few weeks later that I figured the gamble I was playing and the potential losses I could have made. Thankfully nothing happened. But that moment of realisation helped me get into a more disciplined trading methodology.

My tips for getting successful at forex covers three areas. Common sense, Technical aspects of the platform you choose and the steps to carry out once you are in the trade. So here goes my ten commandments to be a successful forex trader.

The Basics

1. Check the platform you are going to trade with. Dont get caught to a scam.

Read reviews, search about the site that you are going to trade with. Google the site name with "scam" after the site name and see whether there are any reports. Check websites like http://www.forexscamcheck.com/ and http://www.reviewpips.com/ You can never be too careful about where your money goes. Some of the well known online Forex trading platforms include FXCM and eToro. Mail them and call them at least a week before you get in and deopsit the money.

2. Dont put all your money into Forex

Or into anything else for that matter. Forex trading is a lucrative business. However like any other high yielding investments, it carries a considerable risk. There are people who try to gain as much as possible when they see an opportunity to succeed. But if things go wrong, you need to have an insurance of getting back with life.

Some of the newer forex platforms offer trading mini and micro lots. If you are not too sure about what you are doing, trade in these lots. The motivation at this time should not be to make profit, but to break even and understand the dynamics of the forex Market. Accustom yourself with the market for at least one month or two before you move large sums into the trade. Also, dont try to measure how deep it is by dipping your toe; some of the forex platforms require only about 50$ to start off trading. But youd be wiped off instantly. Have atleast 4x 5x the money you are investing as a backup when you are starting off.

The Technicalities

3. Pip Spread

Pip Spread refers to the spread between the buys and the sells in the market. If you buy a Currency and then sell it then and there, you'd loss will be the pip spread. Typically pip spreads are around 2-4 pips in a volatile pair like EUR/USD or GBP/USD.

All most all the online forex trading platforms dont charge a commission. Instead they earn money through the pip-spread. The market you see is actually inclusive of their charges. If the pip-spread is more, that mean lesser profit making opportunities for you and more for them. We'll discuss this further under 8. Pick a Currency Pair.

4. Volatility of the market

This is not something you will be able to pickup from forums or from their websites. But the volatility of the said online forex marketplace is an important measure in deciding your success ratios. The best way to measure the volatility of the markets is to open demo accounts with a few markets and run their applications concurrently and see how much the market moves at normal times. Just remember to avoid the 'rush hours' during financial announcements. You can also pull up historical trading graphs and compare each other. Since these charts rarely contain the volume, take line graphs and candlesticks to perform a comparison.

5. Carry Payment

The actual Forex trade takes three days to settle. Which means for three days, there is interest paid on the currencies you buy and sell. Most of the forex trading places award the traders either the full or partial amount of this interest. This means if you buy a currency and hold it for a few days and sell it back exactly at the same price, you'd still earn a profit through the interest. This interest is called the Carry Payment. Check with your marketplace if they pay you the carry and how much. The carry trade varies for each currency pair and the amount it self varies everyday. To add to it, carry trade can sometimes be negative; meaning you could actually lose money. So make sure that the trading place has a proper interface to notify you of the carry amount for each currency.

6. Technical/Fundamental Analysis and Market News

Most of the traders who are engaged in online forex trades are not top financial analysts. Therefore most of the marketplaces offer the current market news and trading signals to traders via various methods. For example, when you hear that the Dow is going down, what does it really mean to you as a trader? The answer is that the Dollar will move UP. Funny right? Well thats why you have proper analysts at the marketplace who will tell you what to do now. Most of the online places will give these advice for free when you are dealing in a real account and may offer you a preview of what you get. In addition to analysis of the current market news, some offer buy/sell signals for currency pair where there is a forcasted calculated risk and a reward. I personally have made use of this immensly and when it seemed that the entire world was going down, I closed my eyes and hoped to god that the analyst was right. The currency crashed and hit the forcasted level and bounced back right up to my profit making point. If not for that analyst's advice, I would have joined all others in a selling spree and would have made a loss of nearly 350$.

7. Managed Accounts

See if there is any option of getting a professional to handle your account and if so whether the requirements fit your budget. Usually managed accounts are charged with a commission and require a sizable account and you are not going to earn profits like 40-50%. But it will give you a more consistent income throughout the year and peace of mind.

The 'Other's

8. Pick a currency pair

Once you have decided on a platform to trade with, the next thing you need to do is to pick a currency pair to trade. There are quite a few traders out there who deal with several currency pairs and make profits on pretty much all of them. I personally however havent been much comfortable with that. Ive usually picked up a currency pair or three at maximum and studied them and then moved into the market when they were about to make a turn. Regardless of which method you are going to follow, there are a few characterstics you need to look for when you are picking a pair to trade.

1. Currency Volatility

See how volatile the currency pair is; if the currency pair moves only a little, then the chances of you making a loss is low but so is the probability of a profit. Its not abnormal for a currency pair to move or retrace a whole 100pips in a day. You can easily figure out how voaltile a pair is by pulling up the historical price movement charts. If you see a large price movement within a matter of few minutes or a half-hour period, check whether there has been any financial announcements released within that period and filter them out in the initial analysis; Avoid the 'rush hours' (Although there is a way to ride-the-wave, avoid it at the beginning. Once you know how to swim, we'll hit Tampa). A candlestick version of the graphs will help you out a lot in this exercise.

2. Amount of analysis available

Sun Tuz's Art of War tells us,

"If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle."

Check how much of technical and fundamental analysis and market news is available for the currency pair that you choose. The more informed you are, better the chances of winning.

3. Pip Spread and Carry Payment

Check how much of a pip spread is available for the currency pair under normal circumstances and how much of a carry is present. The pip-spread is an indirect measure of how quickly you can close the trade. If the pip-spread is 2-4 pips, you can close the trade within a matter of hours. But if its larger than that, you may have to hold on for it longer and you have a bigger chance of making a loss than a profit.

Be mindfull about the Carry Payment. Its possible to 'win' using certain currency pairs such as EUR/CHF for a period of few days and without much of a risk. But remember, the side you take in the trade and the time you make the trade matters. So check up on how much you are getting for holding the pair.

Having said that, Id reccomend to trade with the majors (EUR/USD, GBP/USD, USD/JPY and AUD/USD) for a while to get the hang of it. They have the most amount of analysis and market news present. Once you are comfortable with it, start trading the more complex strategies involving the 'crosses'. After all, the riches belong to the once who dare.

9. Pick a profit percentage

The biggest problem with the forex trading is the large amount of profit percentages it offers. With a trade that lasts only for a few minutes, its possible to gain profit percentages all the way upto 200%. But thats where the problem is. Once you start making bigger profits, you start become nervous and try to figure out 'how much more' you can make out of the money you invested. Always make a target and reach towards it. Set a target profit (not a percentage, but a profit amount) of about 200$ per month to begin with. Break it down to a weekly basis and reach towards each sub-goal. 50$ per week is not a overly zealous target in forex. In fact, you can make that within few days. If thats the case, make it and leave it there. Read more about the market news and perform analysis and forecasts for the upcoming week and the month. You would be able to pick up better chances. After you've been in it for about two months, start increasing your targeted profit.

10. Set the the stop-losses and leverage

As mentioned in a few places of this article, forex markets move by as much as 100 pips and its a market that runs 24 hours. You cannot be at the market always to see whether you are making a loss or a profit and to close it at the proper time. This is where stop-loss orders comes in handy. Stop losses allow you to set a price at which the position should automatically close if you are making a loss. The converse of this is also available, the price at which the position should close if the order is making a profit. If you have set up the stop-losses and limits properly, you would know how much youd earn or lose even if you dont look at the trade again.

In theory, you always have a 50:50 chance of making profit or a loss. Always set the stop-loss at the half rate of your profit rate; i.e. if you are setting the limit price of the order to close at 100$, set the stop-loss of the order at 50$. By this way, over a number of trades, you will still be making a profit. Choose the stop-losses wisely, so that they dont get triggered off by sudden spikes. Once I was attending a webinar and one of the attendees asked whether it would be ok to set the stop-losses at 15-20$. The reply to that from the host was that you'd get wiped off in a sneeze. Set the stop-losses at least at 50$.

One of the places where newbies make a mistake is at the leverage. A higher leverage allows you to trade larger amounts with a relatively smaller investment. But it also means that you can easily get wiped off (read the article about Pips, Margins and Leverage article for more details on this). Set the leverage to about 200:1 to start off with.

Always open a maximum position for 10% of your total deposit. i.e. If you have only a 500$ investment, make sure your position margins are not over 50$. This gives you a chance to wait for the market to go as low as it wants and come back to hit your profit marker. But if you had opened positions for 250$, you can wait till only you incur a 250$ loss. Then you'd have to either deposit money more, or close the positions at a 250$ loss.

Like said before, there is no sure fire way of becoming a billionaire through forex. But you can make considerable amount of profit and become succesful at forex. What you need is discipline and awareness. The latter can be easily gathered, but the former needs some practice :) Start off small, dont try to become a millionaire overnight. Step fast and step steadily. You'll make a considerable income comfortably. Happy hunting!