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FOREX Trading Philosophy
Keen on starting FOREX trading? Why would you not be? Many beginning FOREX traders are captivated by the allure of easy money. FOREX websites offer 'risk-free' trading, 'high returns' and 'low investment' - these claims have a grain of truth in them, but the reality of FOREX is a bit more complex. As with anything in life, what you put in will determine what you get out. There are two common mistakes that many beginner traders make - trading without a strategy and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start trading. Watching the movements of EUR/USD for example, you may feel that you are letting an opportunity pass you by if you don't enter the market immediately. You buy and watch the market move against you. You panic and sell, only to see the market recover. This kind of undisciplined approach to FOREX is guaranteed to lose you money, and have you waste your time. FOREX traders need to have a rational trading strategy and not allow emotions to rule their trading decisions. The two emotions prevalent in the above example is greed (entering the market immediately) and fear (selling when the market temporarily moves against you). Investing and these two emotions do not gel at all. Keep them out of your trading and you will see results. To make rational trading decisions the FOREX trader must be well-educated in market movements. He must be able to apply technical studies to charts and plot out entry and exit points. He must take advantage of the various types of orders to minimize his risk and maximize his profit. The first step in becoming a successful FOREX trader is to understand the market and the forces behind it. Who trades FOREX and why? Who is successful and why are they successful? This knowledge will allow you to identify successful trading strategies and use them as models for your own. There are 5 major groups of investors who participate in FOREX - Governments, Banks, Corporations, Investment Funds, and traders. Each group has varying objectives, but the one thing that all the groups (except traders) have in common is external control. Every organization has rules and guidelines for trading currencies and can be held accountable for their trading decisions. Individual traders, on the other hand, are accountable only to themselves. If you do not keep yourself in check, nobody else will. Why should they worry if you aimlessly waste your money? This means that the trader who lacks rules and guidelines is playing a losing game. Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must play by the same rules. That is studying these strategies and rules before starting to trade is so important. FOREX Trading Philosophy - Money Management Money management is part and parcel of any trading strategy. Besides knowing which currencies to trade and recognizing entry and exit signals, the successful trader has to manage his resources and integrate money management into his trading plan. Position size, margin, recent profits and losses, and contingency plans all need to be considered before entering the market. This may sound like Greek now! If it does, you have more reason to get to know these terms. Knowledge will empower you on any investment market, including FOREX. There are various strategies for approaching money management. Many of them rely on the calculation of core equity. Core equity is your starting balance minus the money used in open positions. If the starting balance is $10,000 and you have $1000 in open positions your core equity is $9000. When entering a position try to limit risk to 1% to 3% of each trade. This means that if you are trading a standard FOREX lot of $100,000 you should limit your risk to $1000 to $3000 - preferably $1000. You do this by placing a stop loss order 100 pips (when 1 pip = $10) above or below your entry position. As your core equity rises or falls you can adjust the dollar amount of your risk. With a starting balance of $10,000 and one open position your core equity is $9000. If you wish to add a second open position, your core equity would fall to $8000 and you should limit your risk to $900. Risk in a third position should be limited to $800. By the same principal you can also raise your risk level as your core equity rises. If you have been trading successfully and made a $5000 profit, your core equity is now $15,000. You could raise your risk to $1500 per transaction. Alternatively, you could risk more from the profit than from the original starting balance. Some traders may risk up to 5% against their realized profits ($5,000 on a $100,000 lot) for greater profit potential. As you can see, the novice needs to get through quite a bit of education, understanding and planning before those 'risk-free' trading, 'high returns' and 'low investment' promises will come into play. What are you waiting for? Get yourself a decent FOREX Trading Education. If you need more information, feel free to visit http://www.investing-smarter.com. Dries Cronje has a BSc (Actuarial Science) degree and is currently studying to be an actuary. He has worked as an ACtuarial Consultant for almost five years. For more information, please visit www.investing-smarter.com">http://www.investing-smarter.com
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What are Your Options Regarding Forex Options Brokers? Forex option brokers can generally be divided into two separate categories: forex brokers who offer online forex option trading platforms and forex brokers who only broker forex option trading via telephone trades placed through a dealing/brokerage desk. A few forex option brokers offer both online forex option trading as well a dealing/brokerage desk for investors who prefer to place orders through a live forex option broker. Money Management, Part 1 There are some common mistakes I've seen traders make in the area of money management. First, let's understand what money management is all about. Forex Scams: How to Spot Them A Mile Away In recent years, investors have witnessed increased number of investment opportunities and offerings. While the complexity and success of these investment products vary, technological innovation has made the Forex market one of the fastest growth areas. Why Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ... Have you heard the wise saying that a trader who fails to plan, plans to fail? I have, and I was once that trader! However, did you know that even though traders who have constructed a plan, which incorporates their trading stategy (their "edge"), they have a plan that is likely to fail?If we look at all traders who participate in the market: we have one group that fails to plan and therefore plans to fail; another group whose plan is failed; and a third group who properly plans and therefore does not fail.Is it any wonder that the success rate for forex traders is so slim?Well it doesn't have to be. Stocks Trading - Advantages and Disadvantages What is Stocks Trading?Companies throughout the world issue new stock shares every day. They do so to raise capital in order to invest in the business. Trading Profitably on the Foreign Exchange Market You may be asking yourself "how does one begin to trade profitably as a currency trader?".First, it is important to closely monitor foreign equity markets to attempt to predict or model how their respective currencies will perform against other currencies, ideally, currencies that are not very closely related, nor proportional, to the former currency. Reality of Online Forex Trading Foreign exchange trading is the trading of currencies. Most currencies can be traded. Options Trading - Advantages and Disadvantages What is Options Trading?An option is simply granting someone the right to buy or sell something in the future. In the case of Dow index futures options, when someone buys a Dow call option they are buying the right to purchase that underlying Dow future at a specific price, known as the "strike price," at a future point in time, known as the "expiration date. What is Forex Trading? Forex, or Foreign Exchange, is the simultaneous exchange of one country's currency for that of another.The way it works is an investor who wishes to purchase or sell one currency for another with the hope of making a profit when the value of the currencies change in favor of the investor. The Yin and the Yang of Markets I am reading a fantastic book on trading, first published in 1924, by Richard D. Wyckoff, titled "How I Trade and Invest in Stocks & Bonds". What I Learnt Losing £60,000 My First Year as a Full-time Trader During my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day. 6 Critical Factors For Successful Trading Success in any profession can be broken down into a number of critical factors. Trading is no different. Day Trading Training ... You need more than just going to a free stock market workshop to learn Day trading is all about making buy and sell decisions. When you make a trade either your going to lose money or your going to make money, and some other times you will break even. The Secrets of the Super-Traders The first and perhaps most important "secret" is to realize that your methodology or approach (no matter how good) is only part of being a highly successful trader. This applies to any trading style including, day trading, swing trading or position trading. Example of a Profitable Transaction in FOREX To make a profit, in the FOREX, a trader can enter the market as a *buy position* (known as going "long") or a *sell position*(known as going "short").For discussion, let's assume you've been studying the EURO. Where is the Market Going? If you ask me whether the market will have moved up or down by this time next year, well I may as well flip a coin, because I don't know.If you ask me whether the market will have moved up or down by this time next month, well again, I may as well flip a coin, because I still don't know. Forex Profits The Forex Market-What, When and Why?Forex, FX and the Forex market are some common abbreviations for the Foreign Exchange market. Actually it is the largest financial market in the world, where money is sold and bought freely. How To Handle A String Of Losses Everybody hates to lose and unfortunately no one is blessed with the ability of foresight, therefore losses are an unavoidable part of trading. When we enter a trade we will either be right, or wrong, and even if we broke-even we'd still be classed as being wrong - as nobody enters into a trade just to break-even! When unsuccessful traders encounter a string of losses they begin to engage in self-destructive patterns that help them escape the pain they are experiencing. Trade Entry Techniques Most traders tend to concentrate on pinpointing the perfect entry for a trade. However, in reality the entry price is just one part of the equation. Hedging Foreign Exchange Risks The exchange rate of the Macedonian Denar against the major hard currencies of the world has remained stable in the last few years. Because of the IMF restrictions, the local Narodna (Central) Bank does not print money and there are no physical Denars in the economy and in the local banks.
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