Why are there thousands of online traders and investors that trade daily in the forex market and how are they making money from it? This is just like a relationship; both sides need to be known. To succeed or fail in a forex trade will depend on being right about the currencies and their impacts on one another.
Power of Knowing
Understanding the basics of the market is important in order to make the most out of your invested fund, especially when you are a beginner. What influences forex market the most is global news and events. If for example, an ECB statement is released on interest rates in Europe, it will cause a flood of activities. Beginners tend to have a violent reaction to news like this, closing their positions and then losing out on some of the best trading prospects by being still till the market calms. Instability is the potential in the forex market and not tranquillity.
Many beginning traders make very little profits because they place very tight orders. This method cannot be sustainable in the long run because you have to deal with the difference in the bid and asking the price before making any gain. This is difficult with smaller trades compared to larger ones.
Trading Too Cautiously
You need to give your position a reasonable chance of succeeding. Always making small incremental gains and placing tight stop losses can be a disaster. It can result in undercutting yourself and losing a small part of your money for every trade.
Those that are new to forex can do the trading themselves or have their broker to do it for them. However, they risk losing growths exponentially if they interfere with what the broker is trading on their behalf or seek advice from too many sources. Basically, the strategy the broker uses might need a long maturation period. Seeking too much advice will result in several losses. Take a position, stick with it and do the outcome analysis by yourself.
Have a Strategy
Just desiring to make money from forex is not a strategy. There is a need to map out how you plan to make the money. Whichever strategy you develop should have a detailed approach that reflects the currencies you want to trade and the necessary risk management. Failure to have a strategy could result to you becoming one of the majorities of beginning traders that lose their money.
There is a big advantage that hedge fund, options traders and forex traders have over small retail traders in off-peak hours, that is, usually between 10 pm and 10 am. Their positions can be hedged and moved around when there is a far lesser trade going on. It means they are dealing with a smaller risk. There is only one advice for trading at off-peak hours which is – ‘Don’t.’
It Is either Up Or Down
If a market is going up, then it is going up; if it is going down, then it is going down. There are so many systems that can evaluate past trends but none that can forecast the future correctly. However, if you can recognize that the market is just moving irrespective of the time, you will be surprised to at how difficult it is to blame anybody.
Trade during News Time
It is during the news time that big market moves happen. That is when the volume of trading is high and the moves are important. It is when the big players make adjustments to their positions and changes occur in prices leading to a serious currency movement.
When a trade you made is not working, you should exit. Staying and waiting for a reversal can compound your mistake. However, if you are on a winning trade, you should maintain the position even if you are bored and feel like relieving your stress. Trading comes with stress, acclimatize to it.
Top and Bottom
Bargains don’t exist in foreign exchange trade. Follow the movement of price and make your trade and your results will be sure to improve.
Disregarding the Technical
When the market is moving in one direction, spikes happen. Considering when the market is over-stretched whether long or short is a key pointer of price action.
In the absence of a strategy, your trades come from thoughts and thoughts are emotions. This is a bad foundation for trading. Most people make wrong decisions when they are upset or emotional. Avoid letting your emotions control you.
The more success you make from your trading, the more confident you become. However, if you lose money in the early stages of your trading it is hard to recover it. The trick is not to go into it half prepared. Study the business before you start trading, thus you are applying your knowledge.