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Originally Posted by Stephen  FX trading is far riskier (in general) than investing in the stock market. |
I don't really agree too much with this statement. What is true is that trading of any kind can be rather risky if you don't really know what you're doing. Most people at least have an idea what the stock market is all about, and so have some familiarity with the link between a company that does well and the stock price of that company going up.
Once you understand that it is the relative value between the currencies of two countries that underpins how forex pricing works, then you're well on your way.
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Originally Posted by Stephen There are to many fators beyond your control or information that you are not privvy to. |
Again, true, and worth knowing about, but once you come to grips with this reality it's not a dealbreaker.
Just realise that whereby insider trading is pretty much illegal in most countries, it is part and parcel of the forex market. Central banks can intervene at any time for their own ends. Large commercial, business related forex transactions can take place at any time, which the bank involved in the transaction is naturally privy too in advance, but no one else will be.
The forex market is too large to be controlled by any one entity though, so its large liquidity negates the problems that are caused by this sort of thing.
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Originally Posted by Stephen I often look at FX trading as similer to the Stcok Market. Only - I project a currency as a company and the CEO as the President/Premier/Prime Minister of that Country. Get the picture? |
A close analogy, but a rather false one. If you want to draw a parallel with the stock market then you are better off comparing it like this:
Imagine comparing the stock of two companies (and for the sake of simplicity assume that two companies are in the same field, eg two tech companies, or two car manufacturers). Each company represents a country. Imagine buying the stock in company A, paying for it using stock you own in company B. The amount of your stock in company B that you're willing to pay for stock in company A depends on the relative health and prosperity of both companies at a given point in time.
That relative difference or ratio between the stocks of the two companies will change over time as the companies do well or poorly. Both companies might be doing well at the same time, but one will be doing better than the other, thus the value of its stock should appreciate more than the value of the other company's stock.
You are not concerned about the absolute price of a stock share in either company, but the price of one stock share relative to the price of a stock share in the other company.
Finally, it is not the prime minister or president of a country that should be seen as the CEO of our phantom companies, but rather the head of that country's central bank. In the US this would be Ben Bernanke (head of the Federal Reserve Bank), while in Europe it is Jean-Claude Trichet (head of the European Central Bank).
A very good website to learn the absolute basics of forex trading is
Forex Education, Forex Training, Beginner's Guide to Forex Trading - BabyPips.com.
I also recently wrote an article that beginner traders might find useful entitled
Keys to Trading Success.