Peter Bain has a currency trading course that he sells through forexmentor.com and forexcourse.com

Bird Watching In Lion Country: Retail Forex trading explained or BWILC for short, is written by Dirk du Toit ( aka DrForex).

It is an eBook in PDF format that looks at the common pitfalls of forex trading without the hype.

The Trading from Home website is a membership site that entitles you the use of a forex robot called F.R.E.D™ . You also get a consultation with a Forex Professional from the site.

We have not yet reviewed TradingfromHome.com and are interested in your experiences with them.

Too much leverage: New investors are often attracted to forex because of the possibility of using leverage, or buying currencies on a margin. Unfortunately, many tend to overuse this tool. Using too much leverage—that is, buying a large amount with a small balance and borrowing the rest—leaves you vulnerable even to the slightest fluctuations. What usually happens is that the trader, fearing an even bigger disaster, close the deal and accept a loss.

Trading for the sake of trading: When you’re eager to make your first trade, it’s easy to overlook factors that say you should wait. That’s why a lot of new forex traders look too hard for opportunities, and fool themselves into thinking there’s a deal to be had when there’s really none. As a result, the trade is badly executed, and they take a loss either immediately or down the road. This can also lead to the first mistake, as traders may want to trade well beyond what their account balance allows.

Predicting turnarounds: One of the most common myths in forex trade is that one can tell exactly when a currency pair will change directions or “turn around.” Although there are clues that can lead you the right way, there are no definitive answers, even for professionals. While you shouldn’t act on hunches, it’s not wise to overanalyze either. It’s a matter of knowing which facts to take into account among thousands, and it’s the kind of skill you only get through experience and study.

Using online systems: The internet has made trading easier in a lot of ways, but people have yet to come up with a system that gets it right every time. At best, they can point you to possible leads that you can examine yourself later on. The best way to succeed in forex trading is still to read up on the trade, stay on top of the news, get a feel for your risk appetite, and most importantly, learn from experience.

Availability: As we’ve often said, the forex market is open 24/7. The stock market has fixed trading hours, which presents several drawbacks. For one thing, you can’t react by the minute to influential events. When Lehman Brothers went bankrupt, forex traders made their move right away, many of them from the comfort of their own homes. Stock traders, on the other hand, had to wait and then cram themselves into the trading floor!

Tracking: Most spot forex traders keep their eye on only eight major currencies and four currency pairs—the world’s largest and most frequently traded currencies. It’s no sweat compared to the thousands of stocks listed on NASDAQ and the New York stock exchange alone. Of course, what works to the stock market’s advantage is that risk can be spread out between different stocks; there’s only so much spreading you can do with eight currencies.

Transaction cost: Forex brokers will charge a service fee, but most do not charge commissions for online or over-the-phone trades. In fact, forex has one of the lowest average transaction costs among financial markets. This is largely because forex brokers make most of their money from the bid/ask spread. Stockbrokers are the essential middlemen; they are part of a centralized exchange and have little choice but to get paid from the money that goes through them.

Monopoly and control: Among the main players in the stock market are mutual funds, an investment scheme in which investors pool their money and a fund manager makes investments on their behalf. Mutual funds will often buy or sell large volumes in response to market situations, making it prone to drastic changes. The large volume, liquidity, and number of participants in the forex market protect it from similar blows.

These are just some of the pros and cons between stocks and currencies. While forex has some obvious advantages, stocks also have their strengths. Most investors advise a variety of investments so that you can get the benefits of each one while shielding yourself from the risks.

Generally, the best time to trade is the middle of the week, where the major players—banks, companies, governments—are in the thick of their activity. Companies import products, banks make loans and get deposits, governments sell treasury bills, and most importantly, amidst all this, currencies change hands. As soon as Friday noon rolls around, the market slows down. Of course, there are always exceptions—snap elections, bankruptcies, natural disasters—that come unannounced and spur the early weekenders into last-minute action. But you don’t want to jump in at major news events, as the market will be all over the place and there’s likely to be more guesswork than anything else.

Needless to say, weekends and holidays are the slowest days and therefore the worst times to trade. Popular events such as sports finals can also divert some of the traders from the market, although the effect isn’t as drastic. The market doesn’t stop completely on slow days, so it’s not an absolute rule—if you think there’s something to be gained, go for it!

For more precise timing, try to trade at an hour where two or more markets are in session. Depending on where you are, this can be at the start of a work day or smack in the middle of the night. If you plan on doing this long-term, it may help to have a market hours chart so you know when to sit down and get to business.

Of course, you can also go the DIY route and figure out the best times to trade on your own. The simplest way to do this is to look at the numbers and see when the pip spreads—the difference between the lowest and highest prices of a currency—are the largest. A wide pip spread means that there’s lots of exchange going on that causes a significant swing in prices. But whether you do your own analysis or use a cheat sheet, the rule is simple: always follow the action!

Spot trading involves on-the-spot trading of currencies, based on the market prices in effect at the time of the trade. This is how most people get their start in forex trading, because it’s simple, flexible, and perhaps most importantly, cheap—one can get started with a $100 capital. And because it’s so popular, there’s a wealth of information available, from online resources to crash courses to free books and pamphlets from brokers.

Futures are often considered a market separate from forex, although a futures contract may involve currencies and thus fall under the spectrum. One important difference is that the futures market is centralized, much like stocks. This is good in the sense that there’s lots of transparency and regulation, while avoiding the monopolistic tendencies of the stock market. The catch is that it’s not liquid; since it’s a contract for a future transaction, money is locked in for a given period and you can’t buy or sell on a whim.

An options contract basically overlies a futures contract. It’s a piece of paper that says you can buy an asset, typically a futures contract, at a given time and at a given price. The contract gives you the right, but not an obligation, to buy the futures contract at the expiration date. “Selling” an option, however, makes buying or selling mandatory. Forex options are also centralized; that is, they go through regulating boards such as the Boston Options Exchange. As such, they aren’t as flexible or liquid as spot forex.

The newest addition to forex trade methods is exchange-traded funds. These are essentially a cross between stocks and forex. An ETF typically includes a bundle of shares and currencies, which lets you branch out into a variety of assets instead of sticking to one. This is ideal for beginning investors who would like to diversify, a common strategy for protecting against loss. Again, the drawback is that it’s not a 24-hour market, and the presence of stocks tends to drive up transaction costs.

One major difference between forex and futures is volume and liquidity. The forex market is the biggest in the world, with $4 trillion being traded every day. In comparison, futures are only worth $30 billion daily. If you can’t wrap your head around the difference, let’s look at it another way: the forex market is over 133 times bigger than futures.

The reason that size matters is that it translates to better liquidity. Because it’s so big, the forex market allows much larger transaction sizes, and thus more money to go around than any other market. The futures market, being based on future transactions, has fewer funds available for trade at any given time. Forex allows you to liquidate positions or stop transactions any time, at no cost. This is important because it allows you to make snap decisions based on political, economic, or social events that can affect your currencies.

This leads us to the next point of comparison: flexibility. The forex market is more flexible than futures, an advantage it also holds over stocks. Different markets open and close at different hours, so that trading takes place 24 hours a day. If a major bank closes in London, Japanese forex traders can buy or sell their pounds even as the Tokyo market sleeps. Those trading futures, on the other hand, will have to scramble to make their move the minute the market opens. There is such a thing as an overnight futures market, but access is limited and there’s very little volume.

Finally, commission costs are generally lower in forex than in futures. Although you will have to pay commissions in either trade, forex fees are minimal compared to those paid by futures traders. Because there are lots of forex brokers, prices are lowered in response to the competition—the classic rule of supply and demand at play. There aren’t as many brokers in the futures market, so there aren’t as many forces driving down the rates.

Experts are divided as to which of the three types works best. The simplest form of analysis is technical, which deals largely with price movements. It’s based on the theory that price is a one-stop indicator of all market information. A second theory is that price movements tend to follow patterns that repeat over the course of history. So if the price of a currency in 2002 peaked at point A and started falling back, and the same currency approaches this point in 2012, a technical analyst would watch it closely and perhaps sell when point A is reached, expecting prices to fall back down afterwards.

Fundamental analysis looks beyond price and takes social, political, and economic factors into account. These factors influence the supply of and demand for a given asset, which in turn determines price—a basic concept we all learn in our economics classes. A fundamental analyst looks at which economies are doing well, because there is always more demand (and thus a higher price) for the currency of a strong economy. Sounds simple enough, but many things come into play when assessing economic strength, such as unemployment and political stability.

Finally, there’s sentiment analysis, which considers another factor—the trader himself. Sentiment analysts work on the idea that the market is really the product of every player’s views, from what the Fed thinks will drive the dollar up to what the guy in the next cubicle thinks about the euro. Therefore, they act based on how they think the market is feeling. Being the least fact-based strategy, this type of analysis is often used to supplement the other two, but many experts agree that it can’t be completely ignored either.

A typical trader will start by using one of the simpler strategies, either going by price alone or following their instincts. As you become more experienced, you might start reading your papers and letting such events as elections, mergers, natural disasters, and political scandals influence your decisions. In any case, a good decision is always informed—whether it’s by price, politics, or gut feeling.

So what explains the USD’s overwhelming market significance, despite the fact that it’s been largely devalued during the recession and that other economies are on the rise? The main reason is that it is the world’s most widely held reserve currency; that is, countries hold it in large quantities and use it as a common currency when trading internationally. For example, if Japan wants to import something from Italy, it can dip into its USD reserves instead of trading its yen for euros, or as is more common, changing from yen to USD to euro. With a single transaction using a readily available currency, they avoid the high transaction costs. Over the last 15 years, the USD’s share of global currency reserves ranged from 59% to 71% (it was at 61.7% as of October 2011).

Another main reason, and one that’s related to the point above, is that many cross-country transactions use the U.S. dollar as a medium of exchange. The prices of important resources such as oil, for example, are quoted in U.S. dollars. If one country wants to buy oil from another, the buyer has to trade its currency for USD—even if none of them are the U.S. The U.S. financial system is also one of the most liquid, which means that it is easily traded and prices aren’t as prone to drastic changes.

Finally, there are obvious reasons, such as the U.S. economy being the largest in the world, and the U.S. itself being the only military superpower in existence to date. Its political system is also extremely stable, a fact that has proven itself in the last few years. The euro, thought to offset some of the USD’s power when it was created in 1999, has fallen sharply in large part because of political struggles in member states. All this to say that if you’re in the forex game at all, it does pay to watch the USD closely!