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?”
As most traders I started by trying to puzzle out Forex trading without any help. I was always hunting for new methods to learn more, bring in more revenue, and be a better trader. Many people also tried to feed me lies, gimmicks, and sales pitches but I didn’t buy into them. Becoming profitable at Forex strategy trading was not simple and it took lots of work and effort. During my journey to become a profitable trader I learned one of the biggest Forex secrets.
Successful traders are not hunting for jackpot trades (normally trades with quite high risk parameters) that will make them large sums of income once in a while. Pro traders are rather in search of trades that can produce them smaller profits repeatedly.
In this article you will learn how you can make Currency trading work for you by trading high probability/ low risk trades. Pick your battles wisely: Choosing the right battles is extremely important to ensure that you accomplish your goals. In Forex trading you must pick time frames and currency pairs that suit your trading needs. For example, if you are looking into trading only for a few minutes a day you may need to learn how to trade lower timeframes. If you are planning to trade everyday you may need to consider day trading and so on.
Be sure to possess the right Foreign currency trading “weapons”: I am careful whenever I choose or build a new trading system. Lacking the appropriate trading tools can be quite detrimental and sometimes it can cause you to lose most or all of your trading funds. The best way to measure the success of your trading strategies is by testing for 3-4 months and then analyzing the final results. Every trading month is different but 3 months definitely seems to be the magic number to perform back testing on a FX strategy. To make an omelet you need to break some eggs: No trader wishes to lose but the truth is that every trader loses money.
Additionally, a successful Forex career is formed by several small failures. Successful Forex traders accept the fact that loses are part of the trading game. What really makes all the difference is your ability to manage your risk and find trading opportunities with high reward to risk ratios. Perseverance will always overcome misfortune: The best way to be a consistent and very profitable trader is by having many small victories time upon time.
When facing a losing streak your perseverance and discipline will be tested. Furthermore, a Currency trader that is consistent, never gives up, and takes smart trading decisions will achieve his goals sooner or later; it’s just a matter of time.
Most beginner traders believe that the way to succeed is to find the “holy grail” trading system or technique that can make you millions. This approach will not take you to where you want to go with your trading career. Focus on using simple trading strategies, solid money management, and keep reading my Forex strategy trading tips 😉 and you will be on your way to become a very successful trader. All the best, Jay Molina Pro Forex Trader & Educator
Trading professional Bill Poulos explains how to identify trending forex pairs using the ADX. For more information, visit www.ForexAccelerator.com