Have you ever wondered why most Forex traders lose money?
New traders wanting to make quick money without first having developed the skills needed for Forex trading.
Once youve decided that Forex trading is for you, youll have a greater chance to make successful trades in the long term, because youll develop the correct Forex skills.
Is buying and selling currencies right for you?
Using leverage and margin can help those with little initial capital
Because the marketcan be volatile, there is always the risk of losing money when trading a currency pair.
Losing trades over a long period of time means that your account balance can quickly fall to zero.
In addition to the inherent risk linked to trading, with Forex trading you need to addmargin trading and leverage, which means that you can invest large amounts with little initial capital.
So, this high level of risk means that you need to be sure that you do not use money that you need to live on always trade with money you can afford to lose!
Before even considering trading, you need to know the basics of the markets, what influences them, and how trading works.
you need to have a trading strategy that suits your trading style
Another important aspect is that you need to have a trading strategy that suits your trading style, with strict money management andrisk management rulesthat govern how you allocate your funds to trades.
If you have no trading experience, and you do not know how markets work and relate to each other, Forex trading might not be the right investment option for you at least not yet.
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When making trading decisions, you can be right and make money, but there is also a high probability that youll be wrong and lose money.
Trading with a strategy will avoid you losing your cool
Thats fine as long as your profits are higher than your losses. Losing trades are part of the trading game you need to be prepared for this and not take it personally!
In Forex trading, you need to quickly recognise when youre wrong, and close losing trades as early as possible. Its important to develop yourability to accept your losses andlearn from your trading experience.
But do remember, its ok to be wrong you cant be right 100% of the time in every single trade you execute. And if you cant handle losing, you wont be able to be profitable in the long run.
With good money management you dont have to fear the markets
Fast changing market conditions, high volatility, and leverage can make Forex trading a high risk activity.
You can make huge returns in the FX market, but these kinds of returns do not come without risks, especially when using leverage.
So, if you cant handle the idea of losing every dollar in your account, Forex trading is not going to fit your targeted risk/reward.
Winning Forex Traders can be part time or full time
There are several trading strategies you can use when trading currencies, each requiring a certain amount of time in front of the markets.
Read:Why Trading Forex Part Time May Be the Best Option for You
For example, you can use a trend following method, or position trading strategy, which will require less time than short term trades, likescalpingorday trading.
Keep in mind that learning about trading, the Forex market and how to develop the right trading plan takes time. Youd better be sure you have time to dedicate to this activity before starting to invest in currency pairs.
Read:7 Day Trading Styles and Techniques of the FX Market
The Forex market is open around the clock, which allows you to trade whenever you want.
It provides great flexibility for traderswho want to trade part-timeand as there are no market opening or market closing times the opportunity for potential profits is 24 hours per day, 5 days per week!
Of course, trading volume varies depending on how many sessions overlap, and it often decreases when there are bank holidays in major sessions such as on Wall Street.
Forex trading can also be used if you want to buyas well asshort-sell currencies. If you believe that in the short-term the EUR/USD is going to go down, then youre able to make money from this downward movement thanks toshort selling.
Forex trading is often geared towards technical analysis, so if you have sound knowledge of price study, charting and technical patterns, Forex trading might be a good fit for you.
Forex trading is often geared towards technical analysis
While using technical analysis, you may find it useful to use economic calendars, such as theU.S. Market Economic Calendar, or theGlobal Economic Calendar.
The impact of news is also strong on the Forex market, as currencies quickly react to macroeconomic news, political events and economic data.
So, as a Forex trader, you shouldmonitor the economic calendar for fundamentalsto determine when currency pair prices might accelerate and break important levelsthanks to higher volatility.
As the Forex market can be a volatile market, youll need to be able to tolerate a certain level of risk. To better protect your trading capital, its important to have a sound risk and money management system with rules to follow.
determine your stop-loss and take-profit levels before entering the market
For instance, you should always determine your stop-loss and take-profit levels before entering the market. In this way, youll already know how much youre willing to lose and how much you can expect to earn from your position. This is called your risk/reward ratio.
Another example would be to adapt the size of your positions depending on the current trading conditions and the evolution of your trading capital. All these rules should be part of your trading plan and to be profitable, you should always stick to your plan!
Commitment, patience, and dedication are the most important ingredients in trading.
Staying focused by continual learning and practice is important
Having a trading plan to follow when trading is vital if you want to be successful, but most importantly you need to be committed to follow it, and patient to open/close your positions according to your set-ups.
You need to develop yourinvestment strategy first, or trading system, before investing real money on the FX market if not, how do you know what youre doing, and that what youre doing is making money?
A trading plan is a description of your investment method:
Trading style: scalping, day trading, position trading
Timeframes: 5 min chart, 15 min chart, 4h chart
Risk and money management rules: risk/reward ratio, stop-loss and take-profit orders
Read:Who are the Best Forex Traders in the World?
The Forex market has been a fast-growing market over the last 20 years.
According to the2016 Triennial Central Bank Survey of FX and over-the-counter (OTC) Derivatives Marketsfrom the BIS, trading in foreign exchange markets averaged $5.1 trillion per day in April 2016.
This hightrading volumeincreases the liquidity of the market, which means that its easy and fast for an investor to enter a trade and also reduces the risk of potential price manipulation from others.
Read:What is Illiquidity in the Financial Markets?
Forex tradingalso uses leveragethat can magnify your returns (as well as your losses) in a very short period of time. This leverage allows you to manage more money than you currently have in your trading account for potentially higher profits.
Deciding whether to trade or not to trade the Forex market is up to you, but remember that even if youre one of the smallest actors on the Forex market, you can still profit from it.
Hedge funds, central banks, commercial banks, and international companies, among others, have a powerful impact on currency prices, so you should know who influences the market the most and why.
If you want to take advantage of Forex trading, its a good idea to use a demo account before investing real money in your trading reSpreads for EU tradersorCore Spreads Australiafor those outside the EU and US offers a free demo account which can be linked either to CoreTrader or MetaTrader 4 the worlds leading trading platform!
There is very little chance that you can be successful without trying out your brokers trading platform first. This includes real time charts and trading tools, its trading conditions to test your own trading system.
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