Whether you need a little extra cash or want to dump your job and work from home, it is great to be able to make money on the internet. You do not have a boss and you do not have to leave the comfort of your own living room or den. You can stay home with the kids and work whenever you want. For some people who have trouble getting a job, it is the only option; for others, it is a very attractive alternative to the 9 to 5 world.
The world wide web has opened up so many possibilities for anybody who has a computer and a broadband connection. One of these new possibilities is forex trading, also known as foreign exchange or currency trading.
Forex trading is a way of making money online through financial speculation on the changing values of world currencies. A few years ago the forex market was only accessible to banks and other large financial institutions who could put representatives in the trading floors of the big financial centers of the world, but the internet has changed all of that.
Anybody can get involved these days and you do not need a lot of money to get started. A few hundred dollars is enough. In fact it is so easy to get into online forex trading that many people go live before they should.
We all have dreams of turning a 3 or 4 figure fund balance into 5 or 6 figures, but despite what you may see in the advertisements, this is not easy to do. Forex trading is risky and the only way to make money on the internet with forex trading in the long term is to keep your risks as low as possible. This means that your funds will grow more slowly, assuming you are following a profitable system, but your account is likely to stay in credit even through the inevitable losing runs.
Many people get into forex trading as if they were gambling. They hope for luck and trade on the basis of their intuition instead of looking for a system that works. They talking about 'playing' or 'getting into the game'. The result is that they take too many risks, again like a gambler, and end up losing everything.
This kind of mindset is easy to get into when you are trading with small funds. In fact, forex trading has replaced the online casino for many Americans. That is why so many new traders quickly lose all the money that they put in. If you are serious about wanting to make money, and we hope you are, you must avoid falling into this trap.
Forex trading is simple, in a sense, but it is not necessarily easy. It is tempting to want to rush in and hope that you will be lucky. You must avoid this temptation if you want to be successful. Instead, you will find a good system and master the techniques and tactics that are required to implement it. That is the best way to make money on the internet with forex trading.
Friday, September 25, 2009
Thursday, September 24, 2009
Currency Trading Chart: What is it?
The currency trading chart is one of the most important tools for the forex trader. Charts are at the root of forex technical analysis, which forms trading systems based on studying price movements rather than economic forecasts which are the basis of fundamental analysis in forex trading. Most traders these days prefer technical analysis which does not require any special knowledge or training in economics.
Any currency trading chart will show price movements. Usually you can track these over a variable period of time. You can look at the last few minutes, hours, days or longer. Using a chart in conjunction with the mathematical indicators provided by most brokers and charting services, you can identify emerging tendencies and trends that can signal a trading opportunity.
Forex charts come in three formats.
1. The Line Chart
A line chart plots the closing prices at the end of each trading period, which could be anything from one minute to one day, you can set this. These are joined with a line to show the direction of movement. However, a line chart does not tell you anything about what happened at different times during the time period, only the final closing price.
2. The Bar Chart
A bar chart gives you four prices for each period: opening, high, low and closing price. You will see a vertical line for each period. The top of the line marks the high and the bottom is the low. A notch on the left side shows the opening price and a notch on the right shows the close. Usually these are at different levels but they could be the same. Either one of them could be the same as the opening or closing price but more commonly they are somewhere between.
The advantage of the bar chart over the line chart is that it shows you how wide the fluctuations were during the period, giving you an idea of the volatility of the pair at a glance.
3. The Candlestick Chart
This last type of chart gives you all of the same information as the bar chart but in a coloured format which many people find easier to take in.
Again a vertical line marks the high and low prices during a period, but there is also a wider block that runs between the opening and the closing price. This block will be filled with colour, usually red if the price is falling (opening price is the high end of the block, closing price is the low end) and green or blue if it is rising (closing price is the high end of the block, opening price is the low end). If shown in black and white you will see black for a falling price and white for a rising price.
The colours give you an instant view of whether prices rose or fell during the period. This makes candlesticks quicker to read at a glance than a bar chart. You can immediately see a reversal, which will show up as a series of green blocks marking the trend followed by one red marking the reversal, or vice versa. That is why candlesticks are the favorite type of currency trading chart for many traders.
Any currency trading chart will show price movements. Usually you can track these over a variable period of time. You can look at the last few minutes, hours, days or longer. Using a chart in conjunction with the mathematical indicators provided by most brokers and charting services, you can identify emerging tendencies and trends that can signal a trading opportunity.
Forex charts come in three formats.
1. The Line Chart
A line chart plots the closing prices at the end of each trading period, which could be anything from one minute to one day, you can set this. These are joined with a line to show the direction of movement. However, a line chart does not tell you anything about what happened at different times during the time period, only the final closing price.
2. The Bar Chart
A bar chart gives you four prices for each period: opening, high, low and closing price. You will see a vertical line for each period. The top of the line marks the high and the bottom is the low. A notch on the left side shows the opening price and a notch on the right shows the close. Usually these are at different levels but they could be the same. Either one of them could be the same as the opening or closing price but more commonly they are somewhere between.
The advantage of the bar chart over the line chart is that it shows you how wide the fluctuations were during the period, giving you an idea of the volatility of the pair at a glance.
3. The Candlestick Chart
This last type of chart gives you all of the same information as the bar chart but in a coloured format which many people find easier to take in.
Again a vertical line marks the high and low prices during a period, but there is also a wider block that runs between the opening and the closing price. This block will be filled with colour, usually red if the price is falling (opening price is the high end of the block, closing price is the low end) and green or blue if it is rising (closing price is the high end of the block, opening price is the low end). If shown in black and white you will see black for a falling price and white for a rising price.
The colours give you an instant view of whether prices rose or fell during the period. This makes candlesticks quicker to read at a glance than a bar chart. You can immediately see a reversal, which will show up as a series of green blocks marking the trend followed by one red marking the reversal, or vice versa. That is why candlesticks are the favorite type of currency trading chart for many traders.
Tuesday, September 22, 2009
Forex Trading Course: The 5 Essentials
If you want to get involved in currency trading it is worth looking around to make sure that you find a top rated forex trading course. Of course you will want to start making money as soon as possible but forex trading is risky and if you do not get a good grounding you could easily be losing money instead.
It is not so simple to predict which way currency prices will go. There are many factors to take into account. On top of that, it is vital to open and close your trades at the right moment to get maximum profit from any price change. If you try to work all of this out for yourself it will take a lot of time. So why not give yourself a head start by taking a good forex trading course?
Your course should cover all of the basics so that you are well prepared to begin trading. Here is a short list of important points that you will need to understand. Make sure that your course covers all of these before you sign up.
1. Principles of currency trading
Any good currency trading course will explain the basic principles of the forex market including leverage and margins, pips, spread and other costs, and what to look for in a broker.
2. Technical analysis
Technical analysis includes interpreting charts and indicators to identify trends, swings, breakouts and other factors that could be signals for you to open or close a trade. Different systems rely on different indicators. In the beginning, you only need to master the indicators for your own chosen system. Trying to cover them all could be confusing. Later, you might want to refer to other indicators to tweak your system for better profitability, so it's good if you have access to a course that you can dip into again further down the line.
3. Fundamental analysis
Fundamental analysis relates to the economic news, announcements and other events which affect currency prices. In the end, it is each country's economic performance which causes the value of its currency to change. You do not necessarily need to be able to predict these events. In fact many traders stay out of the market completely around the time of a forex news announcement. But it is important to understand how the process works and keep an eye on the alerts for anything that might affect your trading.
4. Risk management
Risk management concentrates on minimizing your losses through the use of stops, and protecting your funds by limiting the position size. In general your risk on any one trade should never be more than 5% and many traders work on 2%, 1% or even less. Broadly speaking you should expect to reduce the risk for larger fund sizes, simply because it will be more important to protect a fund of several million dollars than one of only a few hundred dollars. But you are pretty sure to crash and burn if you exceed 5% so make that your limit. You may feel like taking a chance for quicker growth on a small fund but wiping out your funds is not a good way to go!
5. Mindset
We put this last because it is usually the last thing that beginning traders want to hear about, but it is possibly the most important of all. In the end, if you do not master the mindset of a successful trader you will not be able to profit from the forex market.
You must develop a cool headed approach and work on your discipline so that you can follow a trading system without letting fear, excitement or other emotions get in your way. You also need to understand how to handle losses on the psychological level. Risk management techniques can help but if you let your emotions get the better of you, it is easy to fall into a pattern that will guarantee more losses. A good forex trading course will include teaching and exercises to help you master the art of self discipline and keep your emotions off the trading floor.
It is not so simple to predict which way currency prices will go. There are many factors to take into account. On top of that, it is vital to open and close your trades at the right moment to get maximum profit from any price change. If you try to work all of this out for yourself it will take a lot of time. So why not give yourself a head start by taking a good forex trading course?
Your course should cover all of the basics so that you are well prepared to begin trading. Here is a short list of important points that you will need to understand. Make sure that your course covers all of these before you sign up.
1. Principles of currency trading
Any good currency trading course will explain the basic principles of the forex market including leverage and margins, pips, spread and other costs, and what to look for in a broker.
2. Technical analysis
Technical analysis includes interpreting charts and indicators to identify trends, swings, breakouts and other factors that could be signals for you to open or close a trade. Different systems rely on different indicators. In the beginning, you only need to master the indicators for your own chosen system. Trying to cover them all could be confusing. Later, you might want to refer to other indicators to tweak your system for better profitability, so it's good if you have access to a course that you can dip into again further down the line.
3. Fundamental analysis
Fundamental analysis relates to the economic news, announcements and other events which affect currency prices. In the end, it is each country's economic performance which causes the value of its currency to change. You do not necessarily need to be able to predict these events. In fact many traders stay out of the market completely around the time of a forex news announcement. But it is important to understand how the process works and keep an eye on the alerts for anything that might affect your trading.
4. Risk management
Risk management concentrates on minimizing your losses through the use of stops, and protecting your funds by limiting the position size. In general your risk on any one trade should never be more than 5% and many traders work on 2%, 1% or even less. Broadly speaking you should expect to reduce the risk for larger fund sizes, simply because it will be more important to protect a fund of several million dollars than one of only a few hundred dollars. But you are pretty sure to crash and burn if you exceed 5% so make that your limit. You may feel like taking a chance for quicker growth on a small fund but wiping out your funds is not a good way to go!
5. Mindset
We put this last because it is usually the last thing that beginning traders want to hear about, but it is possibly the most important of all. In the end, if you do not master the mindset of a successful trader you will not be able to profit from the forex market.
You must develop a cool headed approach and work on your discipline so that you can follow a trading system without letting fear, excitement or other emotions get in your way. You also need to understand how to handle losses on the psychological level. Risk management techniques can help but if you let your emotions get the better of you, it is easy to fall into a pattern that will guarantee more losses. A good forex trading course will include teaching and exercises to help you master the art of self discipline and keep your emotions off the trading floor.
Monday, September 21, 2009
How To Trade Currency: The Basics
If you are considering getting involved in forex trading, it is essential that you know the basics of how to trade currency. Even if you plan on using an automated forex trading system (or forex robot) you will need to understand something about what it is doing in order to set it up right.
Forex trading and currency trading mean the same thing. You will be trading world currencies on the foreign exchange market. Forex and FX are simply abbreviations of 'foreign exchange'.
If you do not use a robot then you will need some system that will help you sort out whether a country's currency is rising or falling, so that you can decide whether to buy or sell the pair that you are trading. You always have to trade a pair of currencies because you are exchanging one currency for another. A popular pair for beginners is EUR/USD, the euro and the US dollar.
Currency trading systems are usually based on technical analysis, which means watching price movements and indicators on charts. Most brokers supply this kind of data or if you do not get everything that you want from your broker, you can sign up to one of the many online forex charting services.
You can get started for a very low initial investment these days. Competition between brokers and the ease of access through the internet has meant that brokers are offering mini and micro forex trading accounts to encourage the smaller investor to get involved.
Costs are generally low too. Most brokers do not charge a fee or commission, but make their money from the difference between the bid and ask prices of the currency pair (that is, the different prices depending whether you are buying or selling). This is good for small investors who can make many small trades without paying any fixed fees. This is one of the reasons why more and more private individuals are getting into forex and wanting to know how to trade currency.
The forex market is open 24 hours a day from Sunday evening to Friday evening (or Monday morning to Saturday morning if you are in Australia or Asia). This can be very convenient if you have a day job and want to get into trading in the evenings. It is also a huge market, with deals totalling almost $4 trillion a day. Prices move fast and there is a lot of money to be made.
Of course there is also a risk. Like any speculative investment, you may lose more than you make, especially in the beginning. You should be prepared to possibly lose your investment funds so do not trade with money that you need for other purposes.
It is important to stick to a system exactly and keep clear records of your trades. If you do not do this you will be shooting in the dark and the net results could be damaging. You need to be sure of what you are doing and able to look back and see what worked and what did not work.
There are many forex trading systems sold online but remember that you only need one profitable system to make money. It is not a good idea to try to use more than one system, and certainly do not switch from one to another all of the time, because that will not work for you. Being consistent in your trading is the key.
Forex trading is risky, but it can also make you a lot of money. Follow these pointers and you will soon have mastered how to trade currency.
Forex trading and currency trading mean the same thing. You will be trading world currencies on the foreign exchange market. Forex and FX are simply abbreviations of 'foreign exchange'.
If you do not use a robot then you will need some system that will help you sort out whether a country's currency is rising or falling, so that you can decide whether to buy or sell the pair that you are trading. You always have to trade a pair of currencies because you are exchanging one currency for another. A popular pair for beginners is EUR/USD, the euro and the US dollar.
Currency trading systems are usually based on technical analysis, which means watching price movements and indicators on charts. Most brokers supply this kind of data or if you do not get everything that you want from your broker, you can sign up to one of the many online forex charting services.
You can get started for a very low initial investment these days. Competition between brokers and the ease of access through the internet has meant that brokers are offering mini and micro forex trading accounts to encourage the smaller investor to get involved.
Costs are generally low too. Most brokers do not charge a fee or commission, but make their money from the difference between the bid and ask prices of the currency pair (that is, the different prices depending whether you are buying or selling). This is good for small investors who can make many small trades without paying any fixed fees. This is one of the reasons why more and more private individuals are getting into forex and wanting to know how to trade currency.
The forex market is open 24 hours a day from Sunday evening to Friday evening (or Monday morning to Saturday morning if you are in Australia or Asia). This can be very convenient if you have a day job and want to get into trading in the evenings. It is also a huge market, with deals totalling almost $4 trillion a day. Prices move fast and there is a lot of money to be made.
Of course there is also a risk. Like any speculative investment, you may lose more than you make, especially in the beginning. You should be prepared to possibly lose your investment funds so do not trade with money that you need for other purposes.
It is important to stick to a system exactly and keep clear records of your trades. If you do not do this you will be shooting in the dark and the net results could be damaging. You need to be sure of what you are doing and able to look back and see what worked and what did not work.
There are many forex trading systems sold online but remember that you only need one profitable system to make money. It is not a good idea to try to use more than one system, and certainly do not switch from one to another all of the time, because that will not work for you. Being consistent in your trading is the key.
Forex trading is risky, but it can also make you a lot of money. Follow these pointers and you will soon have mastered how to trade currency.
Sunday, September 20, 2009
Currency Trading Pip - What is it?
If you are getting into forex trading it is essential to understand the currency trading pip. This is how your profit, loss and costs are measured. Your broker account may translate pips into dollars or other currencies for you, but it may not. In any case you will want to know what it means for yourself.
A pip is a percentage in point which is a transferable unit of measure, much more useful for the purpose of comparison than a dollar profit figure. It is used in price quotes and as a measure of the change in currency prices.
The pip is the smallest measure of movement in the quoted price. Prices for most currencies are quoted to four decimal places, so one pip is 0.0001 units of the quote currency. (The exception is the Japanese yen which is much less valuable and is therefore quoted to 0.01 yen.) The quote currency is the second of the two currencies in a pair. So for example in the pair EUR/USD, the quote currency is the US dollar.
Some brokers are now beginning to quote to five decimal places and there is some argument among traders as to whether a pip then becomes 0.00001, or whether this would just be confusing, since it would mean that some brokers' pips were 10 times as big as others.
If you visit forex forums you will see traders all the time talking about their profitable trades in terms of pips. They will not tell you how many dollars they made, because that depends on their position size which another person would not necessarily replicate. Talking in terms of pips also means that they do not have to reveal the size of their account.
For example you may see a trader talking about making 200 pips profit on a trade in EUR/USD. They could be an amateur who traded a micro lot or a professional bank trader who traded tens of thousands of lots. Each would have made 200 pips, but the value of those pips would have been vastly different.
To know how much it would mean to you in terms of profit and loss, you simply multiply by 0.0001 and then by the lot size. The result will be the profit in the quote currency.
The quote currency for EUR/USD is the US dollar. So if the trader is dealing in standard lots of $100,000, one pip is 0.0001 x $100,000 i.e. $10 per lot. If he made 200 pips profit, that is $2,000 per lot. But if he uses mini lots of $10,000 it's a profit of $200, and on a $1,000 micro lot it's only $20 profit.
Still, if you assume 100 times leverage, he has only had to put up $10 for his $20, $100 for his $200 profit or $1,000 for his $2,000 profit. So it's a pretty good return and no wonder he is haunting the forums to boast about this trade!
Anyway, you can see how it is an advantage to be able to talk in terms of pips.
Also, of course, the currency itself could vary. The quote currency will not always be the dollar. If that example trade was in EUR/GBP then the 200 pip profit would be 20, 200 or 2,000 British pounds. If you wanted to know what that was in US dollars you would need to add another step into the calculation, multiplying by the current exchange rate.
This may sound confusing at first but when you start trading, even in a demo account, you will soon understand what a currency trading pip means in practice.
A pip is a percentage in point which is a transferable unit of measure, much more useful for the purpose of comparison than a dollar profit figure. It is used in price quotes and as a measure of the change in currency prices.
The pip is the smallest measure of movement in the quoted price. Prices for most currencies are quoted to four decimal places, so one pip is 0.0001 units of the quote currency. (The exception is the Japanese yen which is much less valuable and is therefore quoted to 0.01 yen.) The quote currency is the second of the two currencies in a pair. So for example in the pair EUR/USD, the quote currency is the US dollar.
Some brokers are now beginning to quote to five decimal places and there is some argument among traders as to whether a pip then becomes 0.00001, or whether this would just be confusing, since it would mean that some brokers' pips were 10 times as big as others.
If you visit forex forums you will see traders all the time talking about their profitable trades in terms of pips. They will not tell you how many dollars they made, because that depends on their position size which another person would not necessarily replicate. Talking in terms of pips also means that they do not have to reveal the size of their account.
For example you may see a trader talking about making 200 pips profit on a trade in EUR/USD. They could be an amateur who traded a micro lot or a professional bank trader who traded tens of thousands of lots. Each would have made 200 pips, but the value of those pips would have been vastly different.
To know how much it would mean to you in terms of profit and loss, you simply multiply by 0.0001 and then by the lot size. The result will be the profit in the quote currency.
The quote currency for EUR/USD is the US dollar. So if the trader is dealing in standard lots of $100,000, one pip is 0.0001 x $100,000 i.e. $10 per lot. If he made 200 pips profit, that is $2,000 per lot. But if he uses mini lots of $10,000 it's a profit of $200, and on a $1,000 micro lot it's only $20 profit.
Still, if you assume 100 times leverage, he has only had to put up $10 for his $20, $100 for his $200 profit or $1,000 for his $2,000 profit. So it's a pretty good return and no wonder he is haunting the forums to boast about this trade!
Anyway, you can see how it is an advantage to be able to talk in terms of pips.
Also, of course, the currency itself could vary. The quote currency will not always be the dollar. If that example trade was in EUR/GBP then the 200 pip profit would be 20, 200 or 2,000 British pounds. If you wanted to know what that was in US dollars you would need to add another step into the calculation, multiplying by the current exchange rate.
This may sound confusing at first but when you start trading, even in a demo account, you will soon understand what a currency trading pip means in practice.
Sunday, August 9, 2009
FX Trading Software - How Useful is It?
FX trading software programs include the automated systems or robots that help you to trade online from the comfort of your own home. They are very popular but are they necessary? What do they really do?
Many people are unwilling to trust their trading decisions to a computer program, especially at first. It is true that it is wise to be cautious in the beginning, because there is always the chance that you will misunderstand something. But you can almost always use the software in demo mode until you are familiar with all of its settings and features.
The main point to remember is that you are controlling the software, not the other way around. You tell it what to do by setting it up in a way that follows your preferred system.
An automated forex trading system can do many things that you cannot. For example, it can trade 24 hours a day. As the currency markets are international and operate in almost every time zone, they are never closed for business from Monday morning in Australia to Friday afternoon in New York. FX trading software can exploit these very long hours and watch the markets all day and all night, never missing a possible trade.
If you join a retail forex trading company online, you will almost certainly be offered software so that you can operate your account from your own computer. This takes the pressure off the company's website. You can use this type of software to check the currency values and operate your account. This is different than a robot, because you are making the trading decisions and simply using the software to put them into effect.
Automated forex robots, by contrast, are not linked in to one particular broker or company. They run on a trading platform and offer historical market analysis and trend data as well as real time currency values. This data can be extremely valuable for identifying patterns. You can look back to see how currency values fluctuated around the time of certain major events such as an epidemic or an election. Even something like an international sports event can affect national confidence and so cause a change in currency values.
As you become more skilled in interpreting the market trends, you will use all of this data to help improve the success of your trades. Of course there is no guarantee that the currency markets will always behave as they did in the past but any expert will tell you that you cannot ignore the historical data. To put it simply, getting information like this from your FX trading software can help you to make more money from your forex trading.
Many people are unwilling to trust their trading decisions to a computer program, especially at first. It is true that it is wise to be cautious in the beginning, because there is always the chance that you will misunderstand something. But you can almost always use the software in demo mode until you are familiar with all of its settings and features.
The main point to remember is that you are controlling the software, not the other way around. You tell it what to do by setting it up in a way that follows your preferred system.
An automated forex trading system can do many things that you cannot. For example, it can trade 24 hours a day. As the currency markets are international and operate in almost every time zone, they are never closed for business from Monday morning in Australia to Friday afternoon in New York. FX trading software can exploit these very long hours and watch the markets all day and all night, never missing a possible trade.
If you join a retail forex trading company online, you will almost certainly be offered software so that you can operate your account from your own computer. This takes the pressure off the company's website. You can use this type of software to check the currency values and operate your account. This is different than a robot, because you are making the trading decisions and simply using the software to put them into effect.
Automated forex robots, by contrast, are not linked in to one particular broker or company. They run on a trading platform and offer historical market analysis and trend data as well as real time currency values. This data can be extremely valuable for identifying patterns. You can look back to see how currency values fluctuated around the time of certain major events such as an epidemic or an election. Even something like an international sports event can affect national confidence and so cause a change in currency values.
As you become more skilled in interpreting the market trends, you will use all of this data to help improve the success of your trades. Of course there is no guarantee that the currency markets will always behave as they did in the past but any expert will tell you that you cannot ignore the historical data. To put it simply, getting information like this from your FX trading software can help you to make more money from your forex trading.
Wednesday, August 5, 2009
Trade Forex For Profit: The One Thing You Must Do
To be successful and trade forex for profit is like any other profitable business. You must have a trading plan. You need a goal and a strategy for achieving that goal. This is particularly important in the forex investment market which is fast moving with many twists and turns which, for the unprepared can lead to financial disaster. The advertising you see, particularly on the internet, gives the impression of rich pickings and dreams being fulfilled overnight. Ok, some people can be lucky but the same applies to gambling. If you liken forex trading to gambling then you will lose money. So how do we establish our goal and develop a strategy to achieve it?
First you need to establish the correct mindset. You must be devoid of emotions such as euphoria, greed, fear and above all panic. By creating a trading plan in advance and being determined to stick to it you are less likely to be tempted to make emotional decisions.
Be realistic with your goal. Don't set out to make a fortune overnight or even over a few days, weeks or months. The higher the goal, the bigger the risks you will take to try and achieve it. Like any business, plan for a slow level of increasing profits over time.
Establish your boundaries. The most basic being how much money will you set aside for trading. Do not expect to win on every trade. To be successful and trade forex for profit it is simply a matter of winning more often than losing. Do not trade with money you cannot afford to lose. Your position size for each trade must be calculated within this boundary.
Your strategy or trading plan needs to be based around a tried and tested system and your position size will relate to your system. Some systems go for a high number of winning trades but the losses when they inevitably occur are big. At the other end of the extreme, some systems allow for a high number of losing trades where the losses are small but can expect several losses in a row. Most traders will settle for something between those extremes.
Finally, choose your indicators. This is the information and advice you will use with your system. Always use at least 2 or 3 different indicators and only trade when they all point in the same direction.
Ok, so how do we develop our strategy? My advice is to paper trade using a demo account for as long as it is necessary to establish a system, trading style or preference which will achieve your goal. Once you are trading profitably with your demo account, you will move into real money trading with a lot more confidence and a lot less likely to be influenced by emotion.
Be prepared to modify or fine tune your strategy over time to increase your level of profitability as you gain more experience and acquire more knowledge but NEVER EVER change anything during an open trade. You must open and close a trade on the same strategy.
I sometimes liken forex trading to playing poker. Poker is one of the few 'gambling' games which can be profitable if the player has a rigid game plan. A successful player will expect to lose sometimes and knows what his potential gains and potential losses are at every stage of the game and will bet accordingly. A good poker player with be calm and play without emotion and the same goes for a good forex trader.
This is a very brief overview of the need to develop a trading plan in order to trade forex for profit and hopefully will make you feel more comfortable about proceeding further.
First you need to establish the correct mindset. You must be devoid of emotions such as euphoria, greed, fear and above all panic. By creating a trading plan in advance and being determined to stick to it you are less likely to be tempted to make emotional decisions.
Be realistic with your goal. Don't set out to make a fortune overnight or even over a few days, weeks or months. The higher the goal, the bigger the risks you will take to try and achieve it. Like any business, plan for a slow level of increasing profits over time.
Establish your boundaries. The most basic being how much money will you set aside for trading. Do not expect to win on every trade. To be successful and trade forex for profit it is simply a matter of winning more often than losing. Do not trade with money you cannot afford to lose. Your position size for each trade must be calculated within this boundary.
Your strategy or trading plan needs to be based around a tried and tested system and your position size will relate to your system. Some systems go for a high number of winning trades but the losses when they inevitably occur are big. At the other end of the extreme, some systems allow for a high number of losing trades where the losses are small but can expect several losses in a row. Most traders will settle for something between those extremes.
Finally, choose your indicators. This is the information and advice you will use with your system. Always use at least 2 or 3 different indicators and only trade when they all point in the same direction.
Ok, so how do we develop our strategy? My advice is to paper trade using a demo account for as long as it is necessary to establish a system, trading style or preference which will achieve your goal. Once you are trading profitably with your demo account, you will move into real money trading with a lot more confidence and a lot less likely to be influenced by emotion.
Be prepared to modify or fine tune your strategy over time to increase your level of profitability as you gain more experience and acquire more knowledge but NEVER EVER change anything during an open trade. You must open and close a trade on the same strategy.
I sometimes liken forex trading to playing poker. Poker is one of the few 'gambling' games which can be profitable if the player has a rigid game plan. A successful player will expect to lose sometimes and knows what his potential gains and potential losses are at every stage of the game and will bet accordingly. A good poker player with be calm and play without emotion and the same goes for a good forex trader.
This is a very brief overview of the need to develop a trading plan in order to trade forex for profit and hopefully will make you feel more comfortable about proceeding further.
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