Learning the Forex Trading Strategies

If you recon you have ice water in your veins and can control your emotions like the Terminator, then you might make it big in the world of Forex Trading. Yes it's the largest financial market in the world, trading over $3 trillion every day, and it'll spit you onto the sidewalk without a second thought, given half a chance. 

Strategy One: Know what your dealing with. Knowledge is king in this big money game, big profits can be overtaken by crushing losses if you don't familiarize yourself with this market and how the whole system works. In the Forex markets, the the big boys are Commercial Banks, Central Banks and Investment houses, the Trade Makers, plus a few private individuals with large capital. With the speed of movement and high liquidity of this totally electronic market, transactions are done almost instantaniously; there are no membership fees to this big boys club and there is always the allure of big, big profits.

As is the nature of this club, the predominance of trading is done with the major currencies; the $US, Japanese Yen, Euro, British Pound, Canadian Dollar, Australian Dollar and the Swiss Franc. The are all matched and traded as currency pairs; USDJPY, EURUSD, USDCHF etc. Everything is speculative and virtual, there is no actual product bought or sold. It is all based on the perceived value of one currency against another. You buy Euros with $US anticipating the Euro will increase in value, once it does you sell the Euro and reap the rewards, provided you read it right.

Strategy Two: Learn the language and values; Lots, Mini Lots and Micro Lots, Spread, Leverage, Opening a Position and so it goes on. What does it all mean? You need to know, because it's your money and you worked hard for it, so I don't think you want to lose it... Then there is analysis, how you read the markets and the charts. Do you base your trading on Technical or Fundamental analysis, they are significantly different, yet Fundamentals can have a big influence on Technicals. You need to know when to trade and when to stay well away. Fundamentals can drive the charts, technical analysis interprets them, it's technical analysis you can use every minute of every day, Fundamentals are outside your control and if you flip the coin and it comes down wrong, you can end up in oblivion.

Strategy Three: Develop a solid trading strategy. Your trading strategy is you bible, it's what you do and don't do and why. Once established and extensively tested, they guide every part of your trading, telling you when to open and close a trade and when to stay away. Without a sound strategy, you will never be able to analyse the reasons a trade worked or failed. They are like the sign posts that take you to a destination, miss one and you could be lost. A good, sound trading strategy will increase your profits and significantly lessen your losses. It won't eliminate them, because nobody is perfect 100% of the time.

Strategy Four: Practice until it becomes second nature. Paper trade in real time, it is the only way to test your trading strategies. Once your paper trades work consistently, then think about exposing your real money but not before. You have to make sure your trading strategies are bullet proof. A professional trader can look at the charts and tell precisely where the amateurs started playing, scary right?

Strategy Five: Choose the right Forex Broker. Make sure that they are regulated by state or Federal laws. The sharks abound in these high priced waters, and offer plenty of juicy bait for the unwary investor. If that 'carrot' looks sweet it probably is, and candy coated to boot! Once it hooks your account, you may never get it back, don't believe me? Check out Forex Scams and see for yourself.

Forex trading may at first look easy, but the emotional stress, demands and challenges of being a profitable forex trader requires more than just a glancing knowledge of the market. It requires a razor sharp mind and the emotions of the ice witch of the north, it’s about planning and a rock solid strategy.