There are more than 48 million household traders in the United States and more than 11 million are online with one purpose—to make profits from their investments and to take control of their retirement funds.
What is the purpose of investing? To make money, right! I have always said that the single greatest source for wealth is the stock market. It always has been and always will be. Well, this has been obscured somewhat over the last couple of years.
I have spent a great deal of time traveling across this great country of ours teaching people (investors) how to take control of their financial lives. I have spoken to many individual investors who have come up to me and told me their trading nightmares—told me that their portfolios have lost upwards of 90 percent of their value.
That in itself is a real tragedy, but what makes it worse is that many of these individual investors are approaching retirement; they do not have the luxury or the time to start rebuilding their retirement nest eggs. They are faced with some very harsh decisions. Well, let me tell you: It is never too late—you have to take action. If you don’t, you will lose.
One of my favorite sayings is, "If you always do what you have always done, then you will always get what you have always gotten." Let’s change this. I will teach you how you can start to make a difference just by increasing your awareness of and education about an alternative to the stock market, opening up opportunities that have long been available to Fortune 1000 companies, big banks, and institutions.
As a foundation to what I am going to be talking about, let’s look at the biggest mistakes investors make, regardless of what market or what instrument they are trading.
WHY TRADE THE FOREX?
There are many benefits in trading the foreign exchange market (the
FOREX). A few of them are
It has continuous liquidity.
It has very low dealing costs; 4 to 5 price interest point (pip; discussed later in this chapter) spreads.
It has 100:1 leverage for margin trading.
It has a very volatile, trending market.
It has a two-way market; that is, traders participate in bull or bear markets.
It is open 24 hours a day from Sunday night to Friday afternoon.
There are no separate commissions.
HOW PROFITS ARE MADE
I make profits by using margin trading, where a relatively small deposit is required to control much larger positions in the market. My recommended brokers require a 1 percent margin deposit. Therefore, $1000 controls,$100,000 of trade currency.
Currencies are traded in dollar amounts called lots. One lot is equal to $1000, which controls $100,000 in currency. This is margin. A margin call can occur when your trading account drops below this minimum $1000 per lot traded.
Currencies are traded on a price interest point (pip) system. Each currency pair has its own pip value. The goal of a trader is to capture as many profitable pips as possible. Values are determined by mathematical formulas and according to the exchange rate of the particular pair. Some pip values are fixed, whereas others can fluctuate slightly as one currency gains or loses strength against the other.