The Basics

Earlier I mentioned that currency trading is simple. That’s true. But you can make it as complex as you want it to be. What I’m saying is, do you want to learn everything there is to know about the Forex markets, or do you just want to make some money?

If the latter is the case then you’re in for a surprise. I’ve said before I honestly don’t know that much about the markets myself, so that makes my job simple.

I just have to teach you how to make money!

However, if you insist, I can tell you the best book on the market to learn all about this business is “Day Trading The Currency Market,” by Kathy Lien. You can get it at www.amazon.com for under fifty bucks.

Now, let me start by explaining how all this works. We are basically buying and selling a line on a chart, just like we would buy and sell a house. It’s no different.

We’re hoping our line will give us a profit, the same way we’re hoping our house will increase in value. The only difference is the time frame. A few minutes with Forex – a few years with a home.

We start out with a small position until we’ve made some money. If the trade begins to fail we dump it with a small loss – something more difficult to do if we’re buying and selling houses.

If our trade is successful we stick with it. We may even add to it. But basically we just want to make a series of small profits until we reach five percent for the day.

We’ve seen earlier how we can make a profit just by buying or selling the “Latitude Lines.” It’s somewhat easy to do if we have everything set up properly and wait for the market to come to us. But this means watching our screen almost minute-by-minute for that moment to arrive. I have a better way of doing it.

But first, I want to show you exactly how to open an account, fund the account, and set up your screen. I didn’t go into that much detail in the condensed version so that’s what I’m going to show you now.

First, go to http://www.fxtrade.oanda.com.  There are a number of links you can click, but scroll down the left side to “About OandA.” This will give you a pretty good picture of what OandA is all about.

Once you’ve reviewed the firm’s history go to their site which compares the spreads of all their competitors: www.fxtrade.oanda.com/spreads/comparing_broker_spreads.shtml.

Understanding spreads is important because the spread represents the up-front cost of trading. Unlike stocks, there are no commissions in the Forex market. Forex market makers, like OandA, generate most of their revenue from these spreads.

Now go back to http://www.fxtrade.oanda.com and on the left side again click on “Open New Account,” under either the FXTrade Accounts, or FXGame Practice Accounts. The choice, of course, is up to you. But, since you’ve come this far and are probably serious about making money, I would suggest opening an actual account. Why?

I can tell you from experience you’re going to learn faster with a real account simply because you’re going to pay more attention to a real account! Plus, if you’re successful with a demo account you’ll end up getting the real thing anyway.

Don’t forget, you can start with as little as you wish! OandA even says $1 but I would give yourself a little more wiggle room. Perhaps $100 to $500 dollars. As I said earlier, “Your training starts with your first deposit.”

Finally, check out all the links to interest payments of which OandA is the leader of its competitors: http://fxtrade.oanda.com/fxtrade/interest_payment.shtml

Okay, let’s open an account: http://fxtrade.oanda.com/fxtrade/open_account.shtml

Everything is self-explanatory. Just follow the steps, 1-2-3. One question they will ask is what leverage (margin) you want to use. We’ll go into that later in detail but for now simply use the default setting of 20:1.

They will also ask you to verify your ID. I presume this is to discourage money laundering, but in any case it’s no big thing. Download the “id_confirmation.pdf” form and follow the instructions.

Later, you should also review and print out the “Platform User Guide” by going to

Home=> Support=> Platform User Guide.

Okay.  It’s time to fund our account with some money. We click on “Deposit Funds” from the “account” tab and that brings up the “Deposit Funds, New Client” window. You must receive a confirmation email before you can continue.

Once this is received scroll down to “Existing Clients” and click on Log In To the Cash Management System. You must then log in to get started. Follow the instructions. They will ask you if you’ve sent funds. Click “no” and select your method of payment.

You may want to review all three methods, bank wire, check or PayPal, which is the easiest. They will credit your account within one working day, but if they’re not too busy it can be as little as one hour.

If you don’t have a PayPal account you can click on the “Open your PayPal account” button and follow the instructions.

OandA charges you 2.9% plus 30 cents ($0.30) to process your deposit from PayPal. On a hundred dollars that’s $3.20 . . well worth it. Let me remind you I make nothing for referring you to OandA. My goal is to see you succeed and opening an account with OandA is just one of the many elements to your success.

If you use PayPal there are a couple of things you should be aware of. First, your name and email address must be the same as your OandA account. Second, when you prepare your PayPal transfer be sure to click on “Add special instructions for the Merchant” and type in your username and account number so they’ll know who’s sending them money.

Now, let’s set up our trading platform. This will vary with each broker, but basically we’re trying to organize the business end of our trading, which has little to do with the actual selection of our trade.