Many new traders end up suffering from analysis paralysis. I would advise putting some skin in the game right from the beginning. You can do this, TODAY, with the following trade.
The one problem with learning how to trade the forex market is that there is so much to learn.
Many new traders end up suffering from analysis paralysis. They’ll paper trade for months only to get bored with the process and then quit. They won’t have lost any real money but they’ll have wasted their education.
I would advise putting some skin in the game right from the beginning. The best way is to put a tiny amount of your account to work in a long trade that pays you interest, daily. When I say a tiny amount, I mean tiny – like one mini-contract.
You can do this, TODAY, with the following trade. (This just happens to be my favorite, by the way.)
Pull up a monthly chart of the AUD/JPY using your favorite charting software or website. You can look at the chart I’m looking at by clicking here.
You’ll see that the pair has been in an upward trend for about 7 years. The reason for this is primarily because a) commodity prices have been on the rise which helps the Australian economy which has prompted the Royal Bank of Australia to raise their overnight interest rate to an astounding 7.25 % and b) The Bank of Japan is a net importer of commodities and is afraid to raise their overnight rate without negatively impacting their struggling economy. The overnight rate of 0.5% makes the Yen an attractive currency to pair with a stronger currency, such as the AUD, and initiate what is called a carry trade.
What should make the carry trade attractive to the new trader is that you are paid a nice bit of interest (the difference between the higher overnight rate and lower overnight rate) EVERY DAY THAT YOU HOLD THE TRADE!
The caveat is that these trades can unravel quickly. So, after opening this trade you still need to keep an eye on it. But, remember, you are to trade a tiny amount in the beginning. And, of course, you want to have stops in place.
Now, notice from the chart that the pair is at the bottom of the channel on this long term chart. One would expect a bounce from this considering that the overall trend still seems to be intact.
Now, take a look at the daily chart for the pair. Over the past 9 months starting in about August of 2007, the pair has been in a downward channel. This is where the opportunity lies.
The time to open the trade will be when it breaks out of the channel to the upside. When it does this, you can expect the uptrend to resume. In that case, you want to be in to enjoy the ride - and add some daily ca-ching in your account!
