As an activity, forex trading compliments my writing and fits nicely into my working day.

The first thing that I have to say is that I know very little about the wider world of forex. Even though I have trained and am successfully achieving my forex targets each week it was only when researching for this article that I ventured into the frantic world that forex inhabits.

Forex – what is it ?

“Forex” is the term used for “FOReign EXchange” The foreign exchange market is the biggest and fastest growing market on the earth. No exaggeration – its daily turnover is about 3 trillion dollars each day. Many people are active on the Forex – from central and commercial banks, corporations, institutional investors, hedge funds and private individuals such as me.

I can categorically state that my forex trading is the only thing that I have in common with banks, corporations, big investor and hedge funds. I’m small fry and happy to be so.

So forex is a market – the goods being traded are the currencies of various countries. If you have ever been to another country you will have exchanged your money to the currency of that country. If you had a reasonable amount of that currency left when you returned home you would have changed it back to your own currency. You may have ended up with (for example) more dollars per pound sterling than you bought them for a few weeks earlier - yay ! Or you may have ended up with less – nay yay :(

You may have been clever and waited for the exchange rates to give you a much better return on your exchange.

Anyway – that’s the principle of the forex. Except that we traders don’t literally handle the actual spondoolies in our hands. We trade electronically and currencies are not physically traded. Anybody with a computer and fast internet connection can trade the forex. You will need to find an online forex broker (of which more later) with whom you can trade on a virtual demo account for as long as you want and until you feel ready to trade with your real money. Once you do feel ready to trade with real money you can switch from the demo account to a “cents” account – which is what I’m doing at the moment. I feel confident enough to invest $10k, if only I had it. I don’t have it – so I’m adding to my trading capital as and when I can from my monthly earning and also, of course, by being successful with my trades.

Another important point is that you cannot lose more than you invest in forex. If you start with a trading account of $500 you can lose that amount - and will only lose it if you have not prepared to trade and if you lack discipline – but you cannot lose more.

What is a Forex "Trade" ?

A “trade” consists of making a decision based upon movements of the charts of your chosen currency pair. With proper training and practice you will know how to do this and also what pair to choose, what time of day to trade and for how long. When I first saw a currency chart, and its constant movements, I was completely freaked. I was never good at math or graphs or anything like that at school. However, I persisted because what little I did know about forex had convinced me that it would fit in with my writing activities.

Anyway, back to the trade : – when a trader observes the relevant graphs (in my case I have three on my screen to help me decide upon a trade) and as a result of this careful observation makes an informed decision about the changing values of the currencies involved, they can decide to either sell or buy that currency. Or decide not to trade because the conditions are not right. To know when not to trade is an important skill for the forex trader.

Some traders open positions that can last for weeks – these are usually the big fish with huge trading capital accounts. Some individual traders open trades that may stay open for hours or even a day or so – these people really understand the economic and financial markets and all the factors that affect these markets. They can look at upcoming international events and make reasonably solid predictions about how these events will affect the forex and trade accordingly. These traders who can open long-term positions can afford the occasional loss and can cope with the stresses of having their money on the line.

I am not like that - this is what I do :-

• I trade for just a few seconds each morning
• I watch the charts for longer than that (between 30 and 90 minutes)
• but my trades are short, sweet and (so far) always profitable
• I open only one trade a day or
• I choose not to trade that day because the charts aren't right
• I have a weekly target. I usually achieve this weekly target long before Friday. This week (23 March 2009) I achieved it by 08.30 am on Monday morning.

Forex Brokers

I mentioned online forex brokers above there are many of these and I cannot review them because I don't know them. I started with the broker that was used by the forex course I studied and I have stayed with them. One thing you may ask is how do the brokers make their money? Well, here’s the lowdown : – some work on a commission basis others (including the one I use) make their money from the “spread”. This is by far the best way to operate, it is done automatically as you trade, meaning that as soon as your trade is in profit you know that your small commission to the broker has been covered.

Why I Choose to trade the Forex

I had hopes that forex trading would supplement my income, help build a small pension fund and buy time for me to be able to write screenplays. I now believe that my hopes will be realised. Slowly but surely forex is helping me to have more financial control over my life and my future. My daughter is currently studying the same course - this is a great thing for a young person. She can travel as much as she wants and still trade 3 or 4 times a week to compound her trading capital.

Now, if any of you have thought about forex before now you may well have been put-off by the jargon. Luckily for me I found a way into forex that completely eschewed the use of jargon. It was only when I researched content for this hub that I realized just how lucky I have been. I did not have to learn about fundamental analysis, technical analysis, Bollinger Bands, fibonacci waves, schoastics, yield curves, moving averages ……bleah !

Last October (2008) I had no real notion of forex – I simply knew that there was a buzz about it on the Work From Home forums that I was trawling for ideas to supplement my income and support my writing ambitions.

I googled the ‘forex’ – there were 40 million pages …… I refined my search; ‘Forex training’ threw up almost 1 million pages and ‘beginner forex training’ almost 150,000 pages. The third listed entry on the first page of that search was the training company that I eventually chose.

What attracted me was the phrase “this course is especially designed for people who know nothing and assumes no knowledge of Forex. I actually prefer it when our students know nothing at all and come with a fresh and open mind.” That summed me up perfectly ! I was keen enough to find out more about forex, but had not yet done enough research to drive me away. I was aware of the many forex advertisers of the “get rich quick” variety – but I naturally avoid any advert for anything that promises the ridiculous.

I spoke personally to the man who designed the course and as a result I enrolled on the course. It lasted one month. The lessons were carefully paced with one or two arriving in my inbox each weekday. The trainer and his assistant were always responsive to email queries and willing to explain when I had questions – however simple my questions may have been. The lessons took an hour or so each day and the course is designed so that people working full-time can easily complete it without falling behind. The materials - .pdf downloads, graphics, audio files and videos – were clear, concise, jargon free and had me playing around on my demo account within days. It was fun – I had expected that it would be a bit dry and out of synch with my usual creative activities. I got feedback on my progress and in addition to learning to trade the forex I was able to develop a business strategy and business plan.

It's all about COMPOUNDING ...

The forex course I took teaches how to compound. I had a vague idea what compounding meant - but had to find a simple story in order to understand it properly. There are a number of versions of this story - in one the emperor ends up as a bankrupt and the invenor of chess moves his family not the royal palace. Here is another version. As an illustration of compounding they both work.

The Emperor of China was so excited about the game of chess that he offered the inventor of the game one wish. The inventor replied that he wanted one grain of rice on the first square of the chess board, two grains on the second square, four on the third and so on through the 64th square. The unwitting emperor agreed to the modest request. But two to the 64th power is 18 million trillion grains of rice - more than enough to cover the entire surface of the earth. The Emperor, realizing that he had been duped, had the inventor of the game beheaded.

Compounding, simply put, is earning interest on interest. If you earn 5% on $100.00, you would now have $105.00. If you then earned 5% on your $105.00, you would then have $110.25 and so on.

Compounding is the most profitable and the safest way to trade on the forex market. Most importantly it protects your trading capital.

Currency prices are always in motion and in the forex market the possibility of a 5% return per week while only risking 1% is very real - if I can do it anybody can. This return on interest is far better than any bank will offer ... if you compound a $1000 account averaging 5% per week, in less than 3 years your account will be very healthy. You will even be able to draw a monthly salary from about the 5th month without affecting the compounding.

Forex Works for Me

I was not ready to trade for real when I finished the course – but that is made clear at the beginning. What I had were all the tools needed to become a good trader. What I needed was practice to build my confidence in myself as a trader. Since I finished the course I have joined the community of previous students of the training. There is a blog which is updated 3 or 4 times a week and where we can submit our daily trades for discussion. It is a great resource. We also have a weekly on-line meeting which is invaluable.

The post-course involvement of the trainers is what makes good solid traders out of us. It is now the end of March 2009 and I am ready to trade for real (if only I had some real money to set up my trading capital – if there are any investors out there ……)

I want to recommend the course that I studied because I do believe that it will be of interest to some of my friends on Hub Pages. Here is a link to Forex Training Works, do let me know if you have any more questions about the course from my perspective.