by Wyatt Atkins

Created on: November 24, 2008   Last Updated: December 16, 2008

Most people know a bit about the stock markets, largely because their retirement funds/accounts usually carry a mix of bonds and stocks. They see Wall Street, large caps, mutual funds and they believe that's where the money is. Well, some of it is there, obviously, as the limos outside would have you believe. But most of the money really is elsewhere.

Any self-respecting lobby can run up or down a stock. Insiders can certainly do it. A small bank might try it. Sometimes, a name commanding respect can drive up the price by 20% by virtue of signalling its intention to enter the game. And unless there are bigger issues unfolding, most analysts can usually predict what will happen in the next 6 months with considerable success.

If you are interested in the Forex, you can forget all about that. There is no Axe for you to follow or feast upon, no specialist, no known or hidden market maker. In fact, there is no central authority whatsoever. No-one will save you by buying out your company at a premium. If you lose, you really lose and lose big you will, and more than once - that's how this game is played.

If you have any perceptions about how the financial system works, you'd be well advised to put them aside. If you thought that the Euro was overpriced at 1.25, then the next stop, 1.50, would have wiped you out, before making you rich at 1.22.But that doesn't make Forex gambling - not by a long shot. A far better description would be that it is a form of chess. But in fact chess is a solved game, where as Forex is not - far from it!

SO WHAT DO I NEED TO KNOW?

You cannot force anything, no matter what your bankroll is. You need to understand your way into the markets, into a situation and into a trade. And you need to have a well defined exit strategy. With each tick of the ticker, the price changes. Your ticket will certainly be filled if the tape moves your way. There is no slippage, no commissions eating into your profit potential. The spreads are usually tight, especially in the more liquid pairs - nowadays sometimes as low as a pip or two. You probably bought or sold leveraging a small initial deposit - that's all you can lose. If you hold a position after the "bell", it is usually rolled over the next day and you pay (or earn!) interest.

Your broker has certainly offered you a web based trading platform - learn its features and work flow well. Clicking where you shouldn't might buy you a few round tickets to an exotic pair you know nothing about. But where do the

• 1
• 2
• Next Page >>