The Forex Nitty Gritty

Learning the forex trading basics is paramount to a very successful trading.  The Foreign Exchange also referred to as the FOREX is the largest financial market in the world, with a volume in excess of four trillion dollars per day.  It amounts to more than four times the stock and futures market put together.

Forex trading is the buying and selling of two currencies at the same time.  Currencies are traded through brokers and are traded in pairs, for example, the GBP/USD, EUR/USD, and USD/JPY.

Unlike other financial markets, for example the New York Stock Exchange or the London Stock Exchange, forex market has no physical location or a central exchange.  The market is run electronically, within a network of banks, continuously over a 24 hour period.

Not until recently the Forex market is dominated by big banks and financial institutions.  The banks also engage several million dollars to trade.  Recently, forex trading has been made easy because of the advent of the internet online trading firms.  These firms are now able to offer trading accounts to retail traders.

Before you start trading, it is advisable to learn forex trading rudiments first.  This will prepare you very well for the task ahead. For you to start trading all you need are a complete set of computer, high speed internet connection and amount of money you are willing to start trading. You must however go through a Forex broker before you start.

The advantages of Forex trading over Futures or commodity trading are many.  Forex trading is available 24hours a day. You do not pay commission in most cases. You have up to 400:1 leverage, price certainty and guaranteed limited risk.

I have been really surprised by the ignorance that is shown by the various traders. They buy some of the cheap online trading robots to trading on their behalf. Some of these robots succeed while most of them have failed. This is because of the fact that these robots have been simulated to do trading in backward trend. There has been a lack of forex education among the traders. Traders use these robots and in their garb they miss out on the strategies that are available free in the market. These strategies have been successfully used by the traders and have stood the tests of time.

As far as the forex education is concerned you can learn by using the many strategies like the one given by Richard Dennis. In this strategy he gave a plan to the group of trainees and they made millions out of it. This strategy is known as the turtle rules. The newbie’s were told to have confidence in this strategy and the result that the group gave after two weeks of trading was beyond anyone’s imagination. Over a period of 4 years the same group made money to the amount of $200 million and afterwards the strategy has been a part of the forex folklore.

This strategy is still available on the internet and is free of cost. But its effectiveness has been reduced due to the ever changing parameters of the market and its increasing volatility. This strategy is very easy to understand and once you have read it you will get to know what a standard strategy should be like. The money management rules of this strategy are excellent and have been admired by the various trade market bigwigs. In this strategy you are bound to loose out more trades than you are going to win but the wins will be more heavier than the losses leading to staggering benefits, which should be the aim of market strategy. A little forex education about the market strategies can do a lot of good for your trading business.

Fear is always a major problem for anyone wishing to trade forex online. No one knows what the market is going to do in the next instance, and trying to deal with this major unknown in our calculations can cause us to become stressed while applying our trading decisions. On the other hand, experience, and the consensus of traders shows that scared money cannot win. To help you deal with this long-term problem so that you can see immediate improvements to your trading results, we have compiled a few items of good advice which you can consult when fear is reducing your profitability.

1. State your goals, and be disciplined in their application

If you find yourself in the middle of the market action, observing many things going on with no idea on what to do, chances are high that you’ll perceive fear when taking any action. The best way of dealing with this problem is knowing what you want from the market. Have clear goals in your trading activity, and apply them with vigorous discipline. If the market conditions do not suit your expectations, simply refuse to take risks. That will allow you to avoid the impact of fear, and to concentrate on the practical aspect of trading without worrying about your capability.

2. Understand that losing is a natural part of a successful trading career

What is the trader afraid of? The losses that can be suffered in even the worst type of trading is limited to a small amount of money. You’ll not lose your life or family, unless you act foolishly and risk much more than you should. Otherwise, losing is a natural part of trading in forex. There has never been a credible and successful trader who made the claim of never losing. The good thing is that you are very much allowed to suffer losses in trading provided that you minimize them with proper money management methods, and prudent risk controls. The motto is to “cut losses short”, not to “avoid losses at all costs”. A trading career with no losses would be a paper trading career. No risk means no reward.

3. Read about the successes of past traders, educate yourself

A good way of boosting your confidence is learning about the experiences and backgrounds of past traders and understanding that they were human beings just like you. No great genius or wonderful education is necessary in trading, but prudence, patience, and commitment are indispensable to a successful trading career. By reading about the successes and failures of past traders, you can improve your understanding of the correct approach to trading, which can only be beneficial.

4. Recognize that there’s no luck or magic to trading, if you do the right thing, success will naturally follow

It is also crucial to understand that trading involves not one drop of luck. And there’s no place for magical trading strategies that will always deliver profits and no or very few losses. This expectation is simply against the basic principles of the trading game, and should be avoided at all costs. Trading is all about managing losses and misfortunes effectively, and you can never do so running after the Holy Grail, or awaiting for your luck to let you ride rainbows to El Dorado. Once you achieve this attitude, and remove the superstitions in your life, in time you’ll get rid of the fear of bad luck and realized losses as well.

5. Trade only when you want, in a relaxing, unstressed environment

To avoid fear in your trading time, ensure that the room where you pursue your activity is comfortable, away from stress and noise as much as possible. Listening to music is advised against, as that detracts from concentration, and increases emotional intensity, while in trading the goal is always to eliminate emotional pressures as much as possible.

Certainly it’s possible to overcome fear and panic in trading. But to achieve this goal, you need to follow a plan with discipline and consistency. To learn forex online, you need good sources. And to apply the lessons learnt, you need a committed and strong drive for success. With such an attitude, it is only a matter of time before all obstacles, including the fear factor, are eliminated on your path to profitability.

How difficult is it to make money trading the Forex market? How much time does it take to actually be able to make a living trading the Forex market? These and other important aspects of trading are to be discussed in this article.

Trading the Forex market has many benefits over other financial markets, among the most important are: superior liquidity, 24hrs market, better execution, and others. Traders and investor see the Forex market as a new speculation or diversifying opportunity because of these benefits. Does this mean that it is easy to make money trading the Forex Market? Not at all.

Forex brokers agree that 90% of traders end up losing money, 5% of traders end up at break even and only 5% of them achieve consistent profitable results. With these statistics shown, I don’t consider trading to be an easy task. But, is it harder to master any other endeavor? I don’t think so, consider musicians, writers, or even other businesses, the success rates are about the same, there are a whole bunch of them who never got to the top.

Now that we know it is not easy to achieve consistent profitable results, a must question would be, Why is it that some traders succeed while others fail to trade successfully in the Forex market? There is no hard answer to this question, or a recipe to follow to achieve consistent profitable results. What we do know is that traders that reach the top think different. That’s right, they don’t follow the crowd, they are an independent part of the crowd.

A few things that separate the top traders from the rest are:

Education: They are very well educated in the matter; they have chosen to learn every single and important aspect of trading. The best traders know that every trade is a learning experience. They approach the Forex market with humility, otherwise the market will prove them wrong.

Forex trading system: Top traders have a Forex trading system. They have the discipline to follow it rigorously, because they know that only the trades that are signaled by their system have a greater rate of success.

Price behavior: They have incorporated price behavior into their trading systems. They know price action has the last word.

Money management: Avoiding the risk of ruin is a primary subject to the best traders. After all, you cannot succeed without funds in your trading account.

Trading psychology: They are aware of every psychological issue that affects the decisions made by traders. They have accepted the fact that every individual trade has two probable outcomes, not just the winning side.

These are, among others, the most important factors that influence the success rate of Forex traders.

We know now that it is not easy to make money trading the Forex market, but it is possible. We also discussed the most important factors that influence the rate of success of Forex traders. But, how much time does it take to have consistent profitable results? It is different from trader to trader. For some, it could take a life time, and still don’t get the desired results, for some others, a few years are enough to get consistent profitable results. The answer to this question may vary, but what I want to make clear here is that trading successfully is a process, it’s not something you can do in a short period of time.

Trading successfully is no easy task; it is a process and could take years to achieve the desired results. There are a few things though every trader should take in consideration that could accelerate the process: having a trading system, using money management, education, being aware of psychological issues, discipline to follow your trading system and your trading plan, and others.