What Makes A Great Forex Trader by Russ Horn
It is commonly thought that it is extremely difficult to be a successful Forex trader. Like anything, this would be true if one is not educated and informed on the topic. As long as you understand Forex trading, and know the correct process to go about it, success can be achieved.
For starters, study the news in the countries that you are trading in. Do not use news for your only resource for though. Events, both good and bad, can have an impact on a country’s currency, but not always. If current events are your only trading triggers you will likely lose money.
Understand the risk and reward scenario for every trade. Weigh the amount of money that could be lost on the venture against how much you will gain if successful. With this information you can make an educated decision whether to make the trade or not. A good risk versus reward ratio is one to three. This means that the chance to lose is three times less than the change to gain.
One must also understand their tolerance for risk. A no lose scenario doesn’t exist in Forex trading. Knowing this you must not extend yourself beyond what you can comfortably lose. When you know your tolerance you can maximize the amount of your trades without going broke. I’m not suggesting you be risk averse, just smart about your trades.
A good Forex trader will also monitor other markets. The stock markets, commodities, and real estate markets are all related in one way or another. By analyzing trends in all of these markets you can identify price movements in currencies. This can make your Forex trades much more profitable.
I highly recommend that you only invest in Forex if you can afford to lose some money. Not every trade will be a winner. Do not use money that you need for your basic expenses such as food, rent, or your car payment. If you use money needed for your necessities and lose, you will put yourself in a bad situation.
An important concept is to stick with areas you are knowledgeable in. It may be tempting to branch out to a new area, but doing so will most likely set you up to fail. Trade in the areas you know about and can spot trends and forecast changes. This will help you to limit your losses.
A skill every Forex trader must have is the ability to read charts. This will allow you to identify price patterns. If you can do so before the signal indicators you will be ahead of the game. You may not enjoy this tactic in the beginning, but once mastered you will surely benefit from it. If you try to avoid learning this important skill you will put yourself at a great disadvantage.
Beginners should always avoid is trading in think markets. These markets have few traders in them, and it can be difficult to liquidate funds that you have invested there. Major markets are more reliable and where you should have your money.
Trades should never be made on impulse. A trade should be planned. When a trade is made on impulse there is likely little research done, and the outcome is generally unfavorable. Remember, it is imperative to understand the risk versus reward of every trade. Only trade when there is a good ratio.
Forex trading can seem difficult to the uninitiated, however when you are properly trained and follow important guidelines it becomes much more profitable. Information and planning are the groundwork for profitable trades. Impulse should be ignored at all cost. It is better to walk away from a trade you are unsure of than to lose your shirt. Follow these simple guidelines and you will be well on your way to being a successful Forex trader.