As forex trading involves high risk, it is important to decide the kind of risk one will be able to tolerate and be comfortable with. The trading size can be calculated before making the investment and it is based on the risk tolerance and profit or loss targets. In forex trading, some currencies are more volatile than others and the more conservative traders follow money and risk management rules strictly, in order to avoid losses.
You know that to break even on your option the exchange rate needs to fall to 1.4175 because you have already paid 50 pips premium to the option seller. If when the option expires the market spot rate is above the option break even price of 1.4175 you as the option holder will allow the option to expire at a loss. Again your risk as the option holder is limited to the premium of 50 pips you paid, a maximum amount of $500. Whereas, if the market spot price is below the break even price at 1.4125, you as the option holder will exercise the option and sell Euro at 1.4175 and immediately buy the same amount in the spot market at a profit of 50 pips or $500. The seller or writer of the long put option like the seller of the long call option, has an unlimited risk less the premium received.
A lot of online courses are free and can be a good starting point for beginners. Another great resource is a public library or a local bookshop. Many books exist on forex trading and are oriented towards aspiring traders. Learning how to trade on the foreign exchange market is just a matter of finding the right courses in currency trading.
Another thing that is quite popular in this current climate is the practice of creating hedge funds. What hedge funds are, are funds which are limited to a group of investors usually in the million dollar range or more, who can afford to diversify into a large number of risk taking adventures; speculating a capital gain. Since there are so many securities in the portfolio it is expected that the capital gains will outweigh the losses. These funds will include, securities, commodities, derivatives (bonds) and currency trading.
If you forex online don't understand a currency don't trade in it. Understanding the reasons behind why you are making a trade are paramount to a successful trade. A trade may look profitable from the outside, but if you don't understand the reasons behind it, you could lose out. Learn your currency pairs before risking money in the market.
While you are demo trading your account, you must develop your own unique trading strategy, by understanding the market movements and picking your best technical indicator which you can read and use with the currency trend to make decision. Your developed trading strategy will be your blueprint for making profit in the market. Stick to it and be disciplined at all time.
Before jumping head on into the forex market, an investor should remember that the two biggest emotions in trading are greed and fear. An investment should never be driven by any of these factors, as trading is a mechanical process, not meant for the emotional ones.
