Secrets About trading forex
There are many different outlooks on trading Forex. some will swear by fundamental analysis, while others will deem it pointless and tell you to focus all your energy on reading technical charts. Some experts will tell you to take advantage of the Forex leverage you are given in the FX market. while others will tell you to stay far away, as the higher the leverage, the greater the risk. Here are some universal pieces of advice for the Forex trader.
You do not have to follow each one of these Forex secrets to the letter of the law, but rather take them as an indication of the type of philosophy you have toward Forex trading. Some of these might not be right for all traders, but they are general tips, which are meant to lead you down the path to Forex success.
Can you get rich by trading forex?
Before we go any further. I am going to be 100% honest with you and tell you the following before you consider trading currencies:
All forex traders, and I do mean ALL traders, LOSE money on some trades.
Ninety percent of traders lose money, largely due to lack of planning, training, discipline, not having a trading edge and having poor money management rules.
If you hate to lose or are a super perfectionist, you’ll also probably have a hard time adjusting to trading because all traders lose a trade at some point or another.
Trading forex is not for the unemployed, those on low incomes
You should have at least $10,000 of trading capital (in a mini account) that you can afford to lose.
Don’t expect to start an account with a few hundred dollars and expect to become a gazillionaire.
The forex market is one of the most popular markets for speculation, due to its enormous size, liquidity, and the tendency for currencies to move in strong trends.
You would think traders all over the world would make a killing, but success has been limited to a very small percentage of traders.
The problem is that many traders come with the misguided hope of making a gazillion bucks, but in reality, they lack the discipline required for really learning the art of trading.
Most people usually lack the discipline to stick to a diet or to go to the gym three times a week.
If you can’t even do that, how do you think you’re going to succeed one of the most difficult, but financially rewarding, endeavors known to man (and woman)?
Short term trading IS NOT for amateurs, and it is rarely the path to “get rich quick”. You can’t make gigantic profits without taking gigantic risks.
A trading strategy that involves taking a massive degree of risk means suffering inconsistent trading performance and large losses.
A trader who does this probably doesn’t even have a trading strategy – unless you call gambling a trading strategy! .
Forex Trading is NOT a Get-Rich-Quick Scheme
Forex trading is a SKILL that takes TIME to learn.
Skilled traders can and do make money in this field. However, like any other occupation or career, success doesn’t just happen overnight.
Forex trading isn’t a piece of cake (as some people would like you to believe).
Think about it, if it was, everyone trading would already be millionaires.
The truth is that even expert traders with years of experience still encounter periodic losses.
Drill this in your head: there are NO shortcuts to forex trading.
It takes lots and lots of PRACTICE and EXPERIENCE to master.
There is no substitute for hard work, deliberate practice, and diligence.
Practice trading on a DEMO ACCOUNT until you find a method that you know inside and out, and can comfortably execute objectively. Basically, find the way that works for you!!.
Day Trading Forex ? might Be A Bad Idea!
The Forex market has understandably become one of the most attractive and popular financial markets in the world. Operating around the clock via a decentralized network of central banks, investment institutions, hedge funds, and similar institutions, the Forex market allows traders to speculate on the movement of currency exchange rates. Players of the Forex tend to like these features most:
- ? Round the clock action ? the Forex market constantly adjusts and is open 24 hours per day between Sunday and Friday afternoon.
- ? Less problems with gap down (when price starts out lower than its previous ending price due to factors that occurred when the markets were closed)
- ? Huge leverage (can get 1:100 margins)
- ? High volume
- ? Live trading (most traders are connected to the Forex market via an Internet platform that provides them with real time exchange rates)
- ? Commission-free trades (but most brokers tend to get the difference between bid and ask price which tends to equal 3 to 5 tenths of a penny on most transactions)
While all of these are very attractive characteristics for any investor, the truth is that there are a lot of people who find themselves on the wrong side of a trend and suddenly in trouble because they try using day trading as an investment strategy. Day trading essentially boils down to making a series of short, small trades in hopes of making a quick profit. A rich idea with often a poor outcome.
People can and do make very good money trading on the Forex market but the most common trait of successful investors is the use of a proven investment strategy, patience, and using pre-determined stops after making certain to do your homework. The ability to understand the emergence and direction of trends through analysis is a common trait in successful Forex traders.
Because day trading often involves multiple transactions made in rapid succession in order to make a profit, it is very hard to properly analyze the day’s events and your charts. Day traders are more prone to fear-basic panic selling and other decisions that lose money and lower profitability.
Day trading is also not a good idea with the Forex market
because transactions are almost always conducted at the very limit of the margins (typically 1/100, or $1,000 is all most investors have in a given Forex transaction of $100,000, or one lot of currency). Because of this, even small fluctuations in the wrong direction can and often do spell disaster for day traders.
Indeed, there are day traders out there claiming to make a good living trading Forex and they no doubt exist ?but they are rare. The volatile nature of the market, the lack of information, and the extensive use of margins in Forex all combine and make day trading possibly a bad investment strategy? period