Today I am pleased to introduce you to Thierry Martin from OnlineTradersForum.com. I asked Thierry, an expert Forex Trader, to talk about his experience in Forex and how the market has changed since he first started.
by Thierry Martin / OnlineTradersForum.com
Like so many long-time stock traders, I have noticed over the last few years a constant stream of ads with the purpose of getting stock traders open an account to trade foreign exchange, or forex. These ads make it sound like we're in the wrong business, because they usually point out all the advantages of trading forex compared to all the disadvantages of trading stocks. If you are like me, you were curious, but never bothered to actually go through with it and give it a try.
Well, finally, I gave in. What triggered my decision to get my feet wet was that I opened a new stock trading account with a company that also offered forex trading. The minimum deposit needed for the stock trading account was $2,000 but for the forex account it was $250, what they call a "mini" account. This sounded like a reasonable amount to risk on something I knew very little about, so I went ahead and funded it.
While waiting the three days for the account to be processed, I started learning how to trade forex by using a simulator account, something that almost every forex dealer offers. These accounts are funded with virtual money, and operate exactly like a live account with the obvious difference that you can't lose your money if your trades go south. I found this very useful, since I made a lot of mistakes that would have cost me real money otherwise. The simulators or "practice accounts" are a very good way to learn forex, although
you need to remember that your trading will be less relaxed when you are trading with real money.
Many forex firms offer the practice accounts to anyone who wants to open one, even those who aren't funding a real account. So you really have nothing to lose trying your hand at forex this way, and finding
out whether or not you want to trade later with real money.
Experiencing the forex market with a practice account, I started to see the validity to many of the claims I heard over the years. I am a late-night person, and it was great to be able to trade at 2:00 a.m. - some of the currency pairs were trading thinly at this time, but there were others with massive moves and huge volume.
Trading long or short was simple, with the same amount of risk, in contrast to shorting stocks where you need to follow certain restrictions. I was able to get out of forex trades going in the wrong direction and reverse my position immediately, and often recoup my losses quickly.
Another great advantage with forex trading is that you don't need to worry about day trading rules - you can trade in and out of a position as much as you want, scalping for small profits 24 hours a day, and you can start with as little as $100 with some forex brokers. (You should probably start with at least $250 though, this is the minimum you need to allow you to make mistakes without getting wiped out completely.)
In my next article I'll point out some more "advantages" to forex trading versus stock trading.