Many new traders end upsuffering from analysis paralysis. They’ll paper trade for months only to get bored with the process andthen quit. They won’t have lost any realmoney but they’ll have wasted their education.
I would advise putting someskin in the game right from the beginning. The best way is to put a tiny amount of your account to work in a longtrade 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 justhappens to be my favorite, by the way.)
Pull up a monthly chart ofthe AUD/JPY using your favorite charting software or website. You can look at the chart I’m looking at byclicking here.
You’ll see that the pairhas been in an upward trend for about 7 years. The reason for this is primarily because a) commodity prices have beenon the rise which helps the Australian economy which has prompted the RoyalBank 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 toraise their overnight rate without negatively impacting their strugglingeconomy. The overnight rate of 0.5% makes the Yen an attractive currency topair with a stronger currency, such as the AUD, and initiate what is called acarry trade.
What should make the carrytrade attractive to the new trader is that you are paid a nice bit of interest(the difference between the higher overnight rate and lower overnightrate) EVERY DAY THAT YOU HOLD THE TRADE!
The caveat is that thesetrades can unravel quickly. So, afteropening this trade you still need to keep an eye on it. But, remember, you are to trade a tiny amountin the beginning. And, of course, you want to have stops in place.
Now, notice from the chartthat the pair is at the bottom of the channel on this long term chart. One would expect a bounce from thisconsidering that the overall trend still seems to be intact.
Now, take a look at thedaily chart for the pair. Over the past9 months starting in about August of 2007, the pair has been in a downwardchannel. This is where the opportunitylies.