Forex
in short means Foreign Currencies Exchange Market. This is said to be the
largest and most liquid market of the entire world today. Some Trillions of Dollars
are traded every day making this market very extremely popular. This factor
makes the Forex market the first choice over stock markets.
The
liquidity of this market gives us the impression that it is filled with
opportunities. Yes it is. An investment of $1,000 can give a return of $100,000
or more. But remember this market is a large black hole which can suck in the
entire investment in no time. I am saying this because 95% of traders in Forex
lose their investment. Around 5% make it the winning line. How to be in the
winner’s club? This is the theme of this article.
If
Forex trading is considered risky then why trade in Forex? There are some
positive sides to the Forex Market. This is one market where you need not find
a product to sell. The product is readily available. You need not advertise the
product, because it is well known to everyone. All what you need is some
knowledge and experience. These are the two important factors, when it comes to
be a successful Forex trader.
Knowledge
is something that the trader can gain by reading articles related to Forex. The
trader can further expand his knowledge by studying Forex charts. Learning to
read charts can give an in-depth vision in Forex trading.
Experience
can be gained from doing demo trades. Nowadays many Forex trading houses give
free demo accounts. These demo accounts do not vary with real accounts. It is
very important that a person who wants to be a trader does lots of demo
accounts and familiarize himself. Demo accounts do a great job in training a person
to be a clever trader. There are lots of potholes in Forex trading. One thing I
would like to mention is the leverage or exposure offered by trading houses. If
a trader has $1,000 in his account he could be trading more than $100,000 worth
of trades. Now this is where the problems begin. If the trader is clever and
experienced will know to use these leverage and convert them into profits. If
not he faces the danger of losing his capital.
What
are the strategies that could save an investor’s capital?
The
first lesson or rule a trader should learn is there is no strategy or trading
system that can rain money does exist. Even if a trader finds or adapts a
successful trading plan or strategy, at some stage it is also like to fail and
disappoint him. This is very important thing to remember because most of the
traders are always on the lookout to find new ways of trading. The reason is
they want to get rich in the shortest possible time so that they can retire
early. Therefore the first rule is to forget looking for a 100% winning system.
Trading is very risky. At the same time it is also very profitable. There is no
reward without risk in any activity.
What
is essential for a successful Forex trading? I have mentioned few basics below
which might be useful for a new candidate. The use of complicated trading system
should be avoided. Too many entry or exit rules can actually make a trader confused
and stay away from the market. Therefore the trading system should be simple as
possible. In reality simple trading systems carry better chance of success. A system comprising Moving averages, breakout
Points and Support and Resistance can be an example for a simple trading
system.
A
trend following method makes the trader is on the right side of the market. Looking
for small profits may be good but the trader should be looking for larger
profits. That must be the goal of Forex trading. Looking for break outs is one
good way of trading the Forex market, because traders usually have made huge profits
trading them.
Looking
for a long term trend is another way of Forex trading. Long term trend means
having ten to fourteen days. However this method needs some market analyzing capability.
The Forex
trader should combine money management strategy, which is probably the most
essential part of Forex trading. The loss should be cut to the manageable
limits. With cash in hand, the trader will be in a position to enter trades
whenever the opportunities are found.
And finally
I would say, the forex trader should have patience. This is also known as time management.
Quick exit can drastically reduce the trader’s profits, and the very purpose of
trading Forex will be in question. With a proper mindset and simple methodology
the Forex trading could be an exciting venture.
Happy
trading.
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