Forex Trading

Forex Trading

Trading in Forex has become the biggest trading activity in the world in terms of volume and value. All major trading houses in the world offer Forex trading instruments. Firms offering these instruments have various instruments tailored to suit both big and small traders. Trading in Forex is tricky. I call it tricky because, many trades are executed without proper insights and without a strategy. A most common practice is to trade many instruments at a time. But the actual truth is one need not enter into many trades involving different instruments. If a trader has a strategy in place he or she can concentrate and build up a trade based on this strategy, he or she stands to win on many occasions. It is the trading plan which places the trader on a winning seat.

What is a trading plan or strategy?

In order to arrive at a trading plan the trader should have a fair amount of knowledge of the market and how it works. In today’s markets one can find many instruments to trade with. There are many trading options presented to the traders. The trader has all the facilities at his disposal to execute trades as he may select. In order to arrive at a trading plan or strategy the trader should and must decide on -

The time to enter

The profit target

The stop loss

The volume he is going to trade

The maximum money he is willing to invest

The above point may look simple but they do play important role in developing a trading strategy.

The time to enter.

The trader should identify an instrument which he whishes to trade and study its price movements. He should make a note of every detail he could collect regarding this instrument. Paper trading is one of the best methods to practice trades. Nowadays almost every trader offer practice terminals to do Forex practice trading. The trader can subscribe to one of these platforms and sharpen his skills. I consider this step is very necessary because the quality of a trade is more important than quantity. Over a period of time the trader will develop the mentality to enter traders when the setup is right in other words whenever the entry rules are seen on the trading screen. 

The profit target

Greed is something the trader should overcome. Greed can kill the profits in the long term. Once the trader enters the market he should have his goals ready that is a clear mind set on profit target. When the target is reached there should be no hesitation to book the profits. There are many ways to handle this subject. Some traders prefer to enter in volumes and book 50 % profits, when the first target reached. They let the profits ride for the rest. This is also a good method.

The stop loss

A seasoned trader knows that his calculations can go wrong. There are many factors which govern the price movement of instruments. And these factors are beyond the control of the traders. This is where the stop loss comes in. The stop loss protects the capital or minimizes the loss. This is very important because the trader needs the availability of capital to trade

The volume he is going to trade

The trader may choose a particular strategy which suits him the best. Some trades may require more capital deployment. Depending on the risk appetite of the trader more volumes may be necessary. If a winning trade opportunity is spotted it does no harm to buy in multiple quantity. This will help the  trader to make more money  

The maximum money he is willing to invest

This is one rule which the trader should keep in mind before he enters any trade. He should invest only the money he has in surplus. In other words the money he is most willing to risk. Forex trading is a venture which involves considerable financial risk.

Conclusion.

Consistency and dedication are the keys to success. These are two important qualities that Forex trader must develop. Consistent trading brings the trader rich experience and also to a higher level. The dedication he maintains makes him a disciplined person. These qualities combined with a good trading strategy will certainly bring more trading opportunities and most importantly Money

Happy trading !