If you want to live in life, you’ve got to risk something. Forex trading is all about big risks and big rewards. With a daily turnover in excess of $4 trillion, there’s no other financial market that is as large, or as liquid, as the forex market. Every day, forex traders fire up their trading platform and charting software with the hopes of making money. Before you go down this path, make sure you’ve got solid ground under your feet and are prepared for the roller coaster ride ahead.
Be Willing To Learn
Don’t make the mistake of trying to learn forex “as you go.” There are education systems out there and training courses for a reason. These courses explain the basics, and help you navigate through a maze of rookie mistakes so that you don’t have to lose money unnecessarily. Besides, you’ll have plenty of opportunity to lose money in the FX market once you have your live account up and running.
Forex requires that you develop a heightened sense of observation. You have to be able to spot trends in the marketplace. These trends clue you in to market sentiment. That market sentiment, in turn, tells you how to set your entry and exit positions. Being able to sift through news stories to find relevant bits of facts that might affect the market is key as is being able to recall various rules and rule exceptions during trading.
Setting rules for yourself is important. No trader walks into the FX market with a vague idea of what he wants to accomplish. Firm profit targets, stop losses, and various other rules are set in place before a single trade is ever executed. When a trader does open a position, he sticks to those rules and doesn’t become emotional over gains or losses in his account. The discipline is a function of behavior, and while having firm and objective rules helps, it won’t prevent a trader from breaking those rules.
What will keep a trader from acting on his emotions, therefore, is a radical change in his behavior. Cultivate a sense of seriousness when trading and the ability to temporarily suppress your emotions until the trading day is over.
Know Your Limits and Set Rules
Every forex trader has limits. These limits could be trading limits, profit limits, loss limits, or other personal trading rules. Before you start trading, figure on investing just 1 percent of your total savings. This is what most professional traders do. Then, plan on setting both profit limits and loss limits. Profit limits are limits you’ll place on profits for the day. Why do this? Because you don’t want to get too greedy in the marketplace. This leads to emotional investing and “revenge trading” on losses.
Loss limits are exactly what they sound like: a limit on the amount of money you can lose. Loss limits prevent you from backsliding too far. This becomes especially important when you use leverage. Finally, never trade when you’re tired, or you’ve just been through an emotionally tough experience. Knowing your psychological limits may be your greatest strength. Of course, the whole point of knowing your various limits is to ensure that you remain objective and focused during the trading day. That, and some luck, will help you win the day.
Stacy Pruitt, a freelance forex strategy and finance writer. Stacy writes about advanced trading and forex indicators. See a video titled “what is forex?”
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There are a lot of things that influence the Forex market. For instance, economic things, like interest rates and inflation, and also political things, such as political unrest in other countries and major changes in government cause up and down changes in the Forex market. The number of factors that can affect the Forex market is infinite, therefore, it is critical to know and understand what causes the Forex market to fluctuate from day to day. One of the benefits of using a signal service is that it analyzes and crunches the data for you, saving you time. It should be noted, however that using a signal service is no substitute for a proper education in the Forex markets. There are two basic types of Forex strategies used to produce trends or indicators; fundamental and technical analysis. Forex analysis that is technical in nature uses methods such as charting tools whereas fundamental analysis uses economic indicators and/or news-based events. Most experts suggest trying a combination of both fundamental and technical analysis, with which you can make long-term projections and also determine entry and exit points. But in the end, it is the individual trader who needs to decide what works best. Utilizing a broker may help you sort through some of the options available to you. A Forex broker can provide you with access to many different trading platforms. In addition to technical analysis most brokers also provide fundamental commentaries, economic calendars and other research. The Forex market is the largest market in the world, and individuals are becoming increasingly interested in it. Before you begin trading it, take the time to find a trading strategy that works for you.