The FOREX Market

the FOREX market is the currency exchange market. you buy and sell currency of different countries. it is extremely volatile, it is extremely tricky, and you can lose a lot of money fast.

now the bright side. you can trade FOREX 24 hrs a day, from sunday afternoon until friday afternoon. you can make a lot of money, but because things happen so fast, you absolutely must have a plan and follow it. and it has to be a GOOD plan, obviously. yes, you could use technical analysis as a plan. and i have to admit that here, in FOREX, t/a has a special advantage over quant: raw speed. if you haven't bothered to quant the currency pair you're trading, t/a can give you that quick snapshot you need to make a decision. if you're very good, you'll be right at least about half the time, which is profitable if you limit your loss to less than your gain.

on the other hand, if you quant the pair and do updates every few minutes, you should find your success rate jumping to about 80% or more. for you quant aficionados, i do provide a set of reporting algorithms in my tutorial. for everybody else, here are some general rules to follow when trading FOREX...

• your FOREX broker has a page that lists all the upcoming scheduled government news releases. STUDY THEM and about 30 minutes before they come out, GET OUT of the related currencies. you never know- the pr may cause the price to go 'way up or 'way down and it's real hard to predict. NOTE: by "related currencies" i mean any currency related to the one issued by the government who's issuing the pr. you'll have to study to figure this out. for example, a USA pr will often have a dramatic effect not only on the USD, but also the opposite effect on the EUR (euro); or, the USD and the CAD (Canadian dollar) often travel in lockstep with each other. again, study and know- but mainly get outta the way!!!!
• never trust common t/a patterns (indicating strong price change) for more than a minute or two, and maybe not at all. these turn into fakeouts- i dunno, maybe half the time. as covered earlier, too many people are using t/a. so the big banks and governments (yeah, govt's trade the market too) know exactly what everybody's gonna do before they do it and they clobber ya!
• my personal rule, most of the time, is never use trailing stops, either for stop loss or for limit stop. the fine print in your deal with your FOREX broker tells you why: "in extremely volatile conditions, trailing stops may not be honoured". and they mean it! i've got burned on this once and learned my lesson. so always use hard stops and limit stops.
• if you can afford it, do not set your stop loss based on what you can afford to lose. set it based on what you realistically believe the pair "could" move to. if you can't afford this, you might want to reconsider the trade and find something better because all you're doing is gambling.
• never gamble on a trade. quant it, or use t/a. do not go with just your hunch.
  

if you can follow just these rules, you should be able to survive in FOREX long enough to make a profit.