Forex trading is trading currencies from around the world on a centralized foreign exchange system. The basic means of making money in this area is to find the difference in currency prices. For example, if you purchased Japanese Yen you may be able to trade 104 Yen for every dollar. If the Yen then moves up in value against the dollar, you can buy back into the dollar at a better exchange rate. Foreign currency trading is done in lots of $100,000. While this sounds daunting, the currency exchange system allows high margin rates. Of course, margin increases your chance to lose, so you have to know what you are doing. One way to get around this risk is to make a mini-Forex account and to use a Forex trading software package. This option allows you to trade in $10,000 lots, and with the high margin allowances in the Forex, you could make trades with as little as $100. As you gain experience in the Forex trading business, you will notice the frequent use of the term ’pip’ The Forex market trades currency prices in pips. A pip means ‘percentage in point’ In the Forex world this pertains to the fourth decimal point, which is equal to 1/100th of 1%. One note about small trade sizes though - you will need bigger pip differentials to make a decent profit. Currencies fluctuate for a variety of reasons, and predicting these fluctuations can be accomplished with technical analysis, and observation of current events, politics, and the economy of the country whose currency you are interested in. Many traders choose to focus their efforts on one foreign currency and look for buy and sell signals by trading the ups and downs of the currency.
Before you start trading Forex you need to understand the 3 facts enclosed and their significance because if you don't, your going to lose. Let's look at our Forex trading for novice's facts and why they are so important...

If you want to make money in Forex trading, you need to make an effort and get a decent Forex education and if you do, you can win. 50 years ago 95% of traders lost money and the same amount lose today and this is despite huge advances in computer technology and the lesson is - it hasn't helped. Simple systems work best and always will do, as they are more robust than complicated ones with fewer elements to break. Anyone can put together a robust system trading quickly but the real key to Forex trading success comes from understanding the next fact. How you deal with inevitable losing periods, will determine whether you will enjoy Forex trading success or not. Many traders believe the so called experts, who tell them they can trade with little or no drawdown but that's fantasy - not reality.

You will face a long losing period of weeks at some point and the key is to take your losses and keep them small - you must trade with discipline until you hit profits again. The key to making money long term in Forex trading is keeping your emotions out of your trading. It sounds easy but with money on the line and the market making you look a fool, it can be hard. Discipline comes from having confidence in what your doing and knowing your strengths and weaknesses; any trader can learn to be disciplined if they want to and it's the key to a huge long term income.