In the past, currency trading was the exclusive preserve of banks but today and after the new revolution of the electronic economy, online Forex trading companies now offer a lot of services to all traders around the world. Today, anyone that has a computer and internet connection can easily start to trade currencies, but sure experience and analysis is very important to succeed in Forex trading.
What Is Good About Forex Trading
Forex market is useful because it helps enable trade and transactions between countries, and it also allows an investment opportunity for risk seeking investors who do not mind engaging in speculation. Individuals who trade in Forex market typically look carefully at a country’s economic and political situations, as these factors can influence the direction of its currency. One of the unique aspects of the Forex market is that the volume of trading is so high. It is estimated that around $4 trillion goes through the Forex market each day.
What Is Not So Good About Forex Trading
Despite the fortunes to be made in Forex Trading, a lot of people have gotten their fingers burnt. Several people have made and lost money in the tune of hundreds of thousands, some have even lost their life savings! For most of these people, Forex trading is a never again decision!
In fact, some have said that Forex is a scam and that the traders always lose their monies. The truth is that it all depends on the person and the level of his or her trading skills. If a person comes to the world of Forex without any knowledge and education about the Foreign Exchange Market and Online Trading, chances are that he or she will most likely lose out.
In general, business of any kind, and indeed life itself, is about risks. As it is in life and any business venture, so it is with Forex trading. In spite of the volatile storms of life, there are still people who are willing to take risks, calculated risks. While some pay off, others are lost and the wise investor simply take these in his or her strides, knowing that the losses come with the terrain.
But do these losses mean that Forex trading is a no go area? Does it mean that none of the Forex traders are making money from the business legimately? How does one start and run a Forex trading business legimately and profitably? Here is an excerpt from an interview with an expert in Forex trading:
How I Started Forex Trading
I started Forex trading 13 years ago. I demo-traded for 5 years which took me throughout my university days. It wasn’t like I did not know what I was doing or I did not have the money to trade life account, but I had my reasons. Forex involves a high level of risk and there are some intricacies that some people don’t know before they venture into Forex. So I tried to exercise patience to learn all these before I invested my money. Even when I started life, I started with minimal amount.
Trading Strategies For Forex Trading
Be fully informed about Forex: You need to know and understand the intricacies of Frorex. If you are in a business and you don’t understand the business, you would have problems. In Forex, there is what we call system, which is the indicator you are making use of. Those indicators will not work for you except you make them work for you. So, when you understand Forex, it is very easy for you to analyze the market and trade. My advice to starters is that they spend time demo-trading like I did, and learning all the intricacies before venturing into life accounts.
Have A Trading System
Your trading system makes it easy for you to go into the market and exit it at the appropriate time. When you go into market at the appropriate time, you attach your trend early and anywhere the price is going, you would be able to follow it there and immediately it gets to where it is going, you exit from the market. And this can only happen when you have a trading system.
Under the offices of a trading system, we have what I call a Dash Board. From the dash board, you see what we call the price pattern and the Chart Pattern. From the price and chart patterns, every pair you are trading, they all have the way they move. The way USD-JPY moves is quite different from the way EUR-USD moves. The way EUR-USD moves is quite different from the way AUD-JPY moves. So, it is from the chart pattern that you know where the price is going.
You also need to stick to your trading system. Do not go about asking traders of the trading system they use and then keep changing your trading system arbitrarily. Just stick with one and make it work for you.
Control Your Fears
If you have the trading plan that Warren Buffet is using and you are possessed with fear, it will be very difficult for you to succeed. You need to have control over fear. Although the fear is there any time you are trading with your real money compared to that of fake money which is a demo. If you are losing $1,000 in a demo, you won’t’ feel it much because you know that there is nothing at stake. But if you are losing $1,000 you are really going to feel it. So if you have control over your fear it is easy for you to excel.
Apply Discipline In Your Trading
In Forex, you have to be disciplined in the area of over trading. A lot of people lose money in Forex because they overtrade. A lot of traders go into Forex because they know the fortune in Forex. They know you can make as much as possible. They believe you can trade the whole day. When you trade the whole day, you find it difficult to trade the following day because you have spent more time analyzing the market. So, it is good you trade for a while a day and you prepare yourself for the following day. Over trading is selfishness.
Avoid Greed
Greediness in the area of using a higher lot size for a smaller account. You can imagine somebody that has a $200 account and is using 1 lot size. One standard lot size is $10 per pip. A move in Forex from 1 to 2 is 1 pip. So you can imagine if someone is now using $10 per pip and you have $200 in your account. If the market works in your favour, you can turn that $200 to $2, 000 in one minute, but if the market moves against you, you can lose all the money. Have control over using a very high lot size to trade. When you do this, it is at the expense of trader.
Apply Proper Money Management
As a trader, it is essential you apply proper money management in your trading. The money you cannot afford to lose, do not sacrifice it to trade. If you have $1, 000 and you are using $100 to trade, you know you still have over 50% of the money you invested, but if you have $1, 000 and you are using $700 to trade, that is too risky.
So traders should not use a bigger percentage of their money to trade, it is not advisable.
Start Trading With Small Amounts
Also, do not make the mistake to start trading large sums in the beginning. You should only deposit that amount of money, you are ready to wipe out. If you lose your account, consider it a learning fee.
If you are starting out, demo trade for at least three months before going life. One thing about Forex is that the fact that you are doing well in demo does not mean you will also do well in life trading. It is a different ball game, though the difference between demo and life trading is just real money and fake money. As you demo trade, you carry out research.
Besides, your performance should be what will determine whether to go into life trading immediately or not. I tell people to judge themselves before they go to a professional. Some trade for one or two months and we advise them to go for life trading. It depends on their ability and how fast they learn.
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