Very few of you will need an introduction to foreign exchange trading, or FX or Forex, as it is popularly called. Nevertheless, I’ll explain just in case you are new to the term. Forex is the buying and selling of foreign exchange over the internet. This is a highly leveraged trading technique and can lead to immense gain or loss, either way. However, there are people who have made this a full time profession working right from the comforts of their homes.
All one needs to start is a reliable internet connection, a laptop or PC and 1000 US Dollars to start with. Make no mistake when you browse the net, as you are sure to do, to find out more about Forex trading, when they tell you that you can open an account with just 1 USD, 5 or even 500 USD. It won’t work. You need that much margin in your account to take the ‘whiplashes’ of the market and prevent margin calls. Having enough money in your account will ensure you stay in a losing trade long enough for the market to swing back up again, even if it takes two or three days.
A margin call, resulting in less money in your account will close the trade while you are still in a loss and leave you at just that – a loss. So ensure that you trade with just 10 percent of your deposit at anytime.
Next, get with the flow. Determine the direction of the trend. If the trend is up, NEVER trade down. Do not go against the trend, you WILL lose.
Get with a strategy and stick to it. If the charts show you that prices are moving in a certain direction and the indication is not with your strategy, let the opportunity go. It’s better to know what you are doing than gamble.
Set small targets. Do not go in for any get rich quick strategy. Set a reasonable target of 5 percent of your deposit per week. You will find that you can easily achieve this in a day. Treat the extra profit as a bonus.
There is no Holy Grail of Forex. Any strategy can go wrong. The only thing that will protect you is a good risk management program. It’s all in the percentages. Trade small, trade consistently and success will be yours.
Do not buy an expert Advisor for automated trading. If that software really worked no one would be selling them. For the same reason, don’t buy strategies either.
To avoid failure remember to: not get greedy, not get even with the market, don’t pick tops and bottoms (you can’t ride the waves), set a target of 5 pips for each trade, be disciplined, trade the same time every day. Oh yes, most importantly, chose the right broker.