Some of the Principles of Trading Successfully in the Forex Market

[tmbaru 10]

Trading in the Forex market is usually surrounded by a certain degree of mystique. This is so because there is no any single formula for trading successfully in this market. But this does not mean that you cannot make thousands or even millions of dollars from trading in currencies. As a trader, you should blend good and sound Forex market analysis with effective implementation to improve your success rate from your trading.

 

1. Proper Preparation

 

It is of paramount importance to realize the value of proper preparation before starting to trade. First and foremost, align your temperament and personal goals with the instruments in the market you can relate to. For instance, if you have a good grip about technical analysis then you should use it rather than using fundamental analysis which you may little about and vice versa. Also, assess the time frame that is appropriate for your temperament. Trading off a 5 minute chart implies that you are comfortable being in that position without the exposure of overnight risk. On the hindsight, if you choose to trade with weekly charts it suggests that you are comfortable with overnight risk. In addition, you should make a decision whether you want to trade frequently or occasionally after a thorough analyzes of the market activities.

 

It is worth mentioning short term scalping is not one of the best methods of trading in the Forex market since it means small profits or small losses. Short term time frames usually provide less profit opportunities as compared to longer term time frames but the risk associated with long term is also high. However, the onus is on you to choose what works best for you. Once you choose a time frame it is good you find a consistent methodology to be employing in your trading. But make sure that you test the methodology to see how well it works so that you can be sure you are working with a winning strategy.

 

2. Positive Attitude

 

Positive attitude in Forex trading means having a mindset that reflects on; patience, discipline, realistic expectations and objectivity attributes. Discipline is the ability to be patient and patience pays. Instead of jumping in a trade, sit back until your trading system triggers an action point of entry or exit. Discipline also entails the ability to pull the trigger at the right time; when the system indicates it is the appropriate time to do so. To improve your rate of winning trades you should also trade objectively with no emotional attachments. Never trade with your emotions because you may end up losing substantial amount of money. Even though the market makes a bigger move than you expected, be realistic.

 

3. Risk Control

 

Since there is no trading system that will trigger a 100 % profitable trades; you have to master the art of risk control to trade successfully and profitably in the Forex market. Even a profitable system of 75 % profit to loss ratio still has a 25 % losing trades. Once you make losses, try to get your trade in the right direction instead of holding onto losses. Never hold to losses if you want to make good sum of money form trading in currencies; if a trade backs off, cut it out and try all over again in the right direction. This definitely calls for discipline and patience. Be sure to make the best out of the market once you start trading in the right direction. Just like in any other business venture, the more the risk the higher the returns but you should be cautious in your trading so that you will not end up emptying your bank account all in the name of taking high risks.