Here are a few things you should learn about Forex trading if you want to make some real money.
- Follow Trends. No matter how many factors you take into account, it still comes down to a degree of guesswork. There is a great deal of money to be made from simply following already existing, reliable trends than jumping in and out as it reverses.
- Have a Trading Plan. Your plan doesn't have to be very precise. You have to set some limits for yourself. It takes a great deal of discipline to be a successful FOREX trader. Frequently you'll feel your emotions start to play into and affect your decisions, but you've got to do what's ultimately best, think rationally and sell when you need to sell.
- Employ a Trading Program. FOREX trading programs are slowly becoming the new standard of trading, with over 30% of all traders currently using them now in 2009. These are programs which automatically trade for you by analyzing real time market data and reacting accordingly. They are equally as effective for beginners as well as experienced traderss.
Successful FOREX trading is a combination of a simple method and having the right mindset to succeed. It is not easy to win at FOREX trading and the facts prove over nine in ten people who attempt to trade FOREX lose. The good news is however that profitable FOREX trading is a learned skill. You don't need to work hard, you just need to learn FOREX trading the right way.
Anyone can learn a system but there is a trait you need to win and that's the discipline to follow the system and preserve equity in losing periods. Trading through periods of losses is hard, the market gives you losses and it hurts your pocket and when this happens, your emotions want to get involved and make you deviate from your system rules.
Any trader can learn to be disciplined but it is based on confidence which comes from the right education and accepting the fact that you have to keep your losses small until you have profits again.FOREX trading success involves having a simple system, combined with the discipline to execute it correctly, run profits and cut losses quickly.
- Know your risk ratio versus your earnings ratio. The analysis of risk and profits is extremely important for any FOREX trader. Minimum risk you should use is 2:1. If you are trading GBP / USD and you want to gain 50 pips, you should not risk more than 25 pips.
- Have a suitable capital. If I lose 50% of my starting capital in a 6 months period, can I still be a trader? Only if the answer is ‘yes’ you can start trading. Your trading freedom must not be influenced by your fear to lose.
- Is this a Trend or Neutral? Learn how to analyze the FOREX market. In a market trend, follow the trend, in a neutral market, buy low and sell high, since you are using stop loss, and you control your risk.
- Understand how the market thinks. Everybody should accept that any information is already included in the price of a currency pair. You must know the indicators to come, and you need to know what is already anticipated by the market. The vast majority of the publications of the market is already anticipated and prices by the market.
- Know why you are in a trade. Keep a journal of your trades and record exactly why you went into each trade. Do not be impulsive and follow your strategy, that way you will learn what strategies work for you long term and which do not work.
- Study. Learn new ideas, keep up to date, and do not trade on the ideas of others, you should always know why you are in a FOREX trade
Here are some simple rules for beginners in FOREX trading.
- FOREX traders should use the free demo account to study FOREX trading. Beginners must patiently study. Beginner FOREX traders may first test the demo account where they can study process, develop individual FOREX trading strategy. If their capability of making profit enhances day by day, this indicate that a beginner FOREX trader might draw up the real FOREX trading account.
- Use stop loss to reduce risk.FOREX trader must be able to afford taking loss. Using the stop loss will prevent any further loss, the affordable loss depends on the account available margin situation. If there is a stop loss, FOREX traders should not feel upset because he or she has prevented the loss from getting worse.
- The account margin must be sufficient.The lesser the trading margin, the bigger the risk, therefore beginners must avoid letting the account margin be too little. Such account amount does not allow any mistake to happen. Even a well-experienced FOREX trader can make mistakes.
- Record the trading details.The beginner should record all the trading details, whether there is certain news or other reasons that influence profit and loss. FOREX traders can not remember the history of every trade, therefore recording is helpful in enhancing FOREX trading skills.
- Do not enter the FOREX market after making loss.Do not eagerly open a new reverse market position in order to recoup from loss. This will only make the situation worse. Do not play with the FOREX market by guessing.
FOREX Trading System
Ask yourself, how many traders achieve consistent profitable results trading in the Forex market? Unfortunately, according to statistics, only 5% of traders achieve this goal. One of the main reasons of this is because Forex traders focus in the wrong information to make their trading decisions and totally forget about ‘Price behavior’ factor.
Most Forex trading systems are made off technical indicators. But what are technical indicators? They are just a series of data points plotted in a chart. These points are derived from a mathematical formula applied to the price of any given currency pair. In other words, it is a chart of price plotted in a different way that helps us see other aspects of price.
Trading decisions based on technical indicators without taking price action into consideration will give us less accurate results. If the price suddenly starts to bounce back off that important level there is no point on taking this signal, price action is telling us the market doesn’t want to go up.
How to create a perfect Forex trading system?You need to make sure your trading system fits your trading personality; otherwise you will find it hard to follow it. Every trader has different needs and goals, thus there is no system that perfectly fits all traders. You need to make your own research on various trading styles and technical indicators until you find a concept that perfectly works for you.
Incorporate price action into your system. So you only take long signals if the price behavior tells you the market wants to go up, and short signals if the market gives you indication that it will go down.
You need to have the discipline to follow your Forex trading system rigorously. Try it first on a demo account, then move on to a small account and finally when feeling comfortably and being consistent profitable apply your system in a regular account.