FX-Forex Trading Blog

Forex can be a complicated business to get a foothold in. It is especially complicated because of the jargon experts and big players use. The truth is that the fundamental ideas and concepts behind forex trading are actually quite simple and easy to understand. Do not let the confusing jargon deter you if you really want to try your hand at earning big on the foreign exchange.

Forex is simple when broken down into the basics. Forex trading is simply trading one currency for another in the hopes that when you trade it back you will make a profit through this transaction. For instance trading Euros for Pounds in the hope that when you trade the pounds back for Euros again you can make a profit at a higher exchange rate.

So what is a trading system then?

You can tackle forex trading in more than one way. You can trade on your emotional gut feeling of what feels like a good deal or you can work with a good trading system that works within certain parameters and can deliver a reasonable profit over time. There are excellent trading systems available so the choice is what you feel comfortable with and what works best for you.

This is the only realistic way of trading, because unless you are a true clairvoyant, your gut has a good chance of misleading you into loss. All the experienced and successful traders on the forex market use one or more trading systems to handle their trading transactions as there is no place for guessing and uninformed wild trading transactions in the Forex game.

Forex trading is not a new game; it has been played for many years. The Internet though has revolutionised forex trading and started a whole new side of the business with online trading. Today we can no longer even think of being a Forex trader without having our chosen trading system on our computers with fast and uninterrupted access to the Internet for online trading.

Today we have become traders across the globe and from any location. There is no longer a difference between being a forex trader from home or form an office. Our trading system platforms have become mobile as long as we have Internet access.

Electronic trading is the future

The Internet allows you to access all the relevant financial information you need at any time of night or day and from any location around the globe. The speed at which online trading is done and the electronic trading system platforms available means that you can check and track the progress of any trade you are involved in at all times. The many websites that deal with forex trading keep everyone up to date with tips, information and trend developments.

There is constant interaction between online traders that hold many benefits for novice online traders. Blogs and forums, as well as review websites, allow you to see how others have experienced specific trading systems and read their grading of all forex software and tools. Forex trading has evolved to such an extent with the help of technology that it would simply be impossible to revert back to the traditional forms of trading.

Forex trading is often in the news, especially when the news is bad. People love horror stories of traders losing all their money and the infamous stock exchange crash of the 1920’s live on in history.

Yes, forex trading can be a volatile world and should not be attempted on a whim without knowing what you are getting yourself into. The most important person in your forex trading will be your forex broker. This person could become your business partner on a long-term basis and you must build up a healthy working relationship with him.

What any prospective forex trader must remember is that your profits are totally intertwined with the profits of your forex broker. If your trading becomes a disaster, your forex broker stands to lose as much as you.

Partners for life

The saying goes that money corrupts and huge amounts of money corrupts utterly. When so much is at stake as with forex trading, there will be unscrupulous people trying to scam you out of your money. What you must do before you choose this person who will be your financial partner through all the ups and downs is to do your homework thoroughly.

You must choose a broker who has your best interests at heart and is scrupulously honest in all his dealings. Check the credentials and track record of brokers you are interested in. Compare what spreads they offer as this will tell you what percentage commission they take.

Taking the time to make sure you choose the right broker is the biggest investment you will ever make in your forex career.

Life is not for sissies; online forex trading is not for the meek, the impatient and those who have an ego larger than Buckingham Palace. Forex trading is not only for the elite, but unless you are disciplined and have nerves of steel, you could find yourself losing more than winning.

To be a successful forex trader means you do not think with your heart but rather with your head. Successful traders think smart, their actions are calculated and they never think they are smarter than the forex market.

There are no quick fixes or short cuts in forex trading. Start at the bottom, learn and understand the market before you do your first real trade.

Act in haste, repeat at leisure

All traders sooner or later get to the point where impatience tries to take over. Steel yourself and start re-evaluating the situation. Check whether your system’s orders and the entry point matches and make sure whether the trade has reached or not reached the exit point.

You must trust your system and this is why all new traders should take advantage first of a demo account to practice and become familiar and comfortable with a system. The bottom line in forex trading is to be disciplined enough to think first and act second and this is done only when you possess nerves of steel.

Many will tell you that it is easy to learn everything you need to know about forex trading and you just have to do a few searches on the Internet to gain this. Yes, knowledge about forex trading is incredibly easy to find, but much of it is merely opinion and will not automatically make you a successful trader.

If it was this simple, then why are such a large percentage of traders still failing? The key lies in getting the right knowledge and not just knowledge for the sake of knowledge. In reality there are now ‘clever’ traders; those have all fallen by the wayside.

There are only smart traders who have taken the time to learn and apply the factors that made them such a success. The smart traders make use of simple and uncomplicated systems. The less intricate a system is, the smaller the chance of things going disastrously wrong.

General versus the right knowledge

Once you grasp the fact that you must have the right kind of knowledge, you must be able to thoroughly understand this knowledge. Without this understanding, you will not be able to implement this successfully in your forex trades. Only once you have the right knowledge, followed by an in-depth understanding of it and how to implement it, comes the last ingredient, which is the confidence to start trading successfully.

Being naïve has no place in the cut-throat world of forex trading. Do not believe the hype written by all those ‘experts’ on the Internet. Gain your knowledge from books and tutorials written by some of the top traders and a definite is to gain insight into the psychology of what makes a forex trader. With this under your belt you will have the right kind of knowledge to maximise chances of success.

There is no such thing as generic in forex trading; the solutions that work for one may lead to losses for another. You need to find and work with a system that is customized to your needs and you are comfortable and confident with. Above all forex trading rests on your personal discipline to see things through, to know when to back out and when to let a seemingly good-looking trade go by.

Basic red lights to avoid

Exit a trade when you are losing on a specific position, or your losses can rise. Set your stop losses not on the balance in your account, but on market related information. Never trade when the market is excessively volatile or liquidity is sluggish, it is better to hold back. Exit and enter a trade based on market information, not on your hunches.

Do not try to use the same system trend, up and down markets, keep to a system for each specifically. During a blow-out phase of the market make sure to stay far away from risk managers. They tend to go into margin call position liquidation order frenzy without checking overbuying and overselling. Trust your inner voice, when your instincts warn you that a trade is dodgy, listen to it and walk away.

On the forex markets, rumors fly faster than the speed of light. Buying on a rumor is okay, but never sell until you hear concrete news. Never break the rule of getting into the market late and getting out early or you could struggle. Lastly, making decisions about trading when you are tired or ill can be risky, as your concentration levels are not likely to be at their highest. Take a break and come back when you’re feeling 100%.

Although making money with Forex Trading is certainly very possible, there are many pitfalls which you can fall into which will limit your success.

Landmines and money pitfalls

Just because lots of people work during the day, and perhaps even yourself too, does not mean you have to trade during the day. Day trading brings with it prices that can ricochet all over the place and random volatility. Trying to be psychic by predicting what the market prices will do won’t get you anywhere either.

Predicting exactly what will happen is next to impossible and of course can be risky. If not prediction then science will lead you straight right? No. No scientific formula ever concocted can bring you guaranteed success in the markets. However doing your research and knowing your market well will give you the best chance possible.

Never trade blindly according to what others are doing, stick to a system that you know. Another thing to remember, especially if you are a newbie to the markets, is that you never, ever trade simply for the sake of trading.

Have patience and play the game with discipline. Do not believe everything you read. Be it from newspaper journalists who know nothing about the Forex markets or trading news because some of this writing is merely hype. Arm yourself with not just general knowledge but the right knowledge about your particular market. Have patience and be disciplined when trading.

So you think that Forex trading is easy? You know your market like the back of your hand; you have done your homework. You have the capital to start off with and you are tired of just watching the big boys play the game, you now want to join them and show them who is boss. You have more patience than the Dahlia Llama and you have worked out the perfect system so you are ready, right?.. Probably wrong.

Staying in control

Clever people are looked up to and respected and you want to be seen as such. There is nothing wrong with that. What is important to remember when playing the Forex game is to be emotionally controlled.  Being in control and keeping a rational head is vital to success.

It can be easy to get caught up in the moment when trading, to make snap decisions which are a reaction rather than a rational decision based on fact.  Whilst taking an age to decide whether to enter or leave a market can also prove costly, making panicky moves will generally prove to be more so.

When playing the Forex game you win some and you may lose some, keep your focus on your long term profits and don’t get bogged down with any possible short term losses. Look at the bigger picture.

Disciplined emotions generally help to lead to success, so ensure that you control your decisions with a rational mindset.

The Forex market is a great way to make money, but when your money is on the line then it is vital to be as informed as possible to minimize any risks.

It is absolutely possible to win more than you lose. Other than doing your homework, having patience and meticulously watching the markets you can also enter into a futures contract.

What will the future hold?

When the Forex exchanges are good and profits are running high it is a natural for a newbie to the market to keep riding when they should lock. Many traders on the markets have the tendency to forget that things can change quickly.

This can leads to a trader riding the market overnight only to wake up to losses in the morning. When you lock your trade at a good price you ensure that you come out a winner should the prices drop. You would enter a trade and wait for the prices to reach a nice profit level.

Once you are sure you are happy with the current price you enter into a futures contract and lock at the current price. This means that if the prices go up some more you lose out a bit but you are also safe guarded if they suddenly crash overnight. Knowing when to lock or when to continue riding the trade can only be gained through experience in Forex trading and doing your homework about your particular trade very well.

The best way to make a success out of forex trading is to arm yourself with knowledge by learning as much as you can before you begin.  To sculpt a successful Foreign Exchange trading masterpiece out of yourself you will need to make use of the tools of the trade.

Pivoting to success

One of the most important tools that successful Forex traders make use of is simply called the “Pivot Point”. Simply explained the “pivot point” is a means for the traders to spot situations, which give the signal to either enter a trade or to make your exit. The “pivot point” will point out when to enter and exit a particular trade in order to come out with the most profit possible in that situation.

The best way to implement the “pivot point” is to develop your own software or to buy software from existing Forex success stories. This software often referred to as Forex robots, can be so sophisticated and precise that it can trade on your behalf while you are not at your computer.

This, of course, does not mean that you can sit back and not put any effort in. You will still need to do all your homework and put the hours in but this tool makes knowing when to step in and step out so much easier.