Tax & Financial Consulting Services
A Crash Course in Online Forex Trading
How to Use a Demo Account to Start Trading Faster
Dear G&G Readers,
Last week, I introduced you to the idea of opening a Forex “practice account” so you can hone your Forex trading skills.
If you missed last weeks comment, a practice account (aka a “demo account”) lets you practice placing Forex trades online on a free online platform. This platform lets you place buy, sell and hold trades with essentially fake money, so you don’t lose a dime of your trading account while you’re learning to place Forex trades.
Today, I want to expand on that idea…and give you a quick crash course in how to use these demo accounts to place your first practice trade.
Most FX dealers (read: “Forex brokers”) offer demo trading stations for new traders. It’s often a two-step process. First you download their software. Then you fill out their form so they can email you a free username and password to use your new demo account. Once you’ve completed that two-step registration process, you’re ready to begin.
Note: Some FX dealers use java-based platforms, which don’t require downloading. While these platforms can be convenient, they usually aren’t as stable to trade on. However, if your dealer uses java, then you can obviously skip the “downloading their software” step and simply sign up for a username and password for your new account.
How to Read Your New Forex Platform
If you’re trading currency pairs, you need to understand what you’re looking at. So first thing’s first…let’s look at how to read a quote.
As you can see in the image, we’re trading the British Pound vs. the U.S. dollar (GBP/USD). The GBP/USD pair has two prices: A sell price and a buy price. The difference between these two prices is called the spread.
So, if the GBP/USD quote is listed as 1.5189 to sell and 1.5191 to buy, then there’s a two pip difference (1.5191-1.5189 = 2.00 pips).
However, you will notice a “fractional pip” value also to the right of the quote. This makes the spread slightly higher. Therefore, the exact spread price at this moment is 2.50 pips (as shown in the diagram).
So what does a quote tell us? It tells us how many dollars equal one pound. At the time of the screen shot, one pound was equivalent to just over US$1.51. So if someone handed me one pound, to give them the equivalent “purchasing power” in dollars, I’d have to give them US$1.51 to be the same. (By the way, this was a screen shot as of May 15, 2009).
This is where the purchasing power of your dollar is lost. You need more dollars to pounds because the value of your dollar is declining. So now do you see why I’ve been saying buy Gold & Silver for the past 1 ½ years as the value of your dollar continues to go south, the value of Gold & Silver will go in the opposite direction…straight north.
Now that we know how to read a quote, let’s take a look at the chart to see where the pound may be going these days. This way we’ll get a bias as to whether we should be buying or selling the pound/dollar pair.
Pound is Trading in A Range!
As you can see from the GBP/USD 180 min chart above, the GBP/USD pair broke its red downtrend line as shown by the arrow pointed at “buy” here. Now it’s starting to bolt higher.
Let’s say we think that newly established trend will continue on. If so, we’d want to place a buy order in anticipation of the pair heading higher. Then it could reverse and we’d want to place a trade to sell in anticipation of the pair heading lower. That’s the great thing about the FOREX market, you can make money regardless if the USD is losing or gaining value against the Pound as long as you are going in the right direction.
Much simpler than it sounds right? Try it for yourself. Once again, I’ve given you several FX dealers that offer free platforms below.
G&G Passive Account Results…One Month down.
Yesterday was officially 30 days trading the account since I deposited the money on April 16, 2009. Really, all I can say is look at the results for yourself. I don’t think I need to say more.
Click here for results: www.gngassoc.com/Forex/090515_EOW.pdf
I’ve gotten a few questions from people so let me clarify some things.
1) Is this a real live account?
2) When you say investing 10% of the account what do you mean?
Answer: I started the account with $1000. So, as the account grows I only trade 10% of the value of the account. Ex: $1000, I only trade $100 and my goal is to make a minimum of %10 on the $100…$10. $1500…trade $150...10% =$15 minimum, but of course as you can see I said minimum and this week alone I’ve been making anywhere between 70-80% per trade a day.
Well, that’s enough for this week, until next time Adios. Oh…I had to throw that in since I’m currently in Mexico….Hasta la vista!
Tax & Financial Consultant, RFC
866-361-3872 toll free fax
"A Prudent man foresees the difficulties ahead and prepares for them; the simpleton goes on blindly and suffers the consequences."
Proverbs 22:3 -- Living Proverbs
LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. G&G Associates gets paid a commission from a membership purchase at www.publicgold.com/gngpreciousmetals.