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Why Research is Vital Prior to Trading Foreign Currency Exchange

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If you’re serious about trading foreign currency exchange for a profit, then you have to be serious about research. In forex, research and profit go hand in hand. The reason why is very simple. Forex, in terms of daily turnover, is the world’s largest capital market. Unlike other capital markets (like stocks or bonds), however, forex does not recognise national boundaries, has no central regulatory authority and, basically, never stops. Furthermore, many of the participants (such as central banks) are not interested in advertising what they are up to. So, if you want to know what is really going on, in forex, you have to dig for the information. It’s there; actually, it’s all over the internet. Many banks have websites with quite a lot of forex-related information free available. Ditto with news organisations such as Reuters and Bloomberg.

Using a “demo account” before you start actual trading is an excellent idea. A “demo” is real, in every sense of the word, but none of your money is at risk.

Trading Foreign Currency Exchange Without Research

Any trading that is conducted without research isn’t trading; it’s betting. Is it possible to bet in forex? Yes. The problem is that forex is a “zero sum game”, meaning that the “winner takes all”. Obviously, if you don’t have a clue as to what you are doing, the odds might be stacked very much against you. The good news is that you cannot lose more than the cash that you put down. The bad news is that, if you use all your cash to secure your first trade, leverage yourself really high and refuse to put any stop losses on, you could lose all your money with your first “bet”. All things considered, playing blackjack might be more fun.

How Often Should You Research Foreign Currency Exchange?

An expert trader never stops learning. Even though most of them specialise in 1 or 2 currency pairs, they are always exploring new ways to do things and new sources of news and information. They even view their mistakes as learning experiences! If you’re serious about becoming a really good forex trader, you have to follow in such footsteps. You’re in good company; some traders are already living legends: George Soros, Jim Rogers, Stanley Druckenmiller, Andy Krieger, Paul Tudor Jones and Jeff Gundlach. Of all these people, Jeff Gundlach is the most open. If you’re interested in what he’s up to, look at He usually hosts a public presentation of his views at the end of each calendar quarter.

Good Research Methods Before Trading Foreign Currency Exchange

Part of being a good trader is having a solid trading plan. This plan needs to be well thought out and tested before you ever start trading. It doesn’t have to be fancy. In fact, it could be something as simple as this: “I’ll only trade the AUD/USD on Monday – Thursday, using a 5-minute chart with 2 exponential moving averages, to tell me when to get in and get out, plus a 30:1 leverage ratio. And, I will always close off all trades before I leave my computer at the end of each day.” After you have your plan, test it for at least a month on a “demo account”. “Demos” carry no risk; they don’t use your money.


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