Forex Trading Strategies

canstockphoto5964748What makes one Forex trader successful while most others fail? There is really no clear answer to this question and from experience I can say that luck is definitely a key factor in coming out profitable.

That said, I will admit that there are definitely some more direct ways to trade Forex than relying on horoscopes and fortune tellers.

The most important factor in learning how to trade Forex is understanding what it is all about. Education, education, education.  Learning the basics about the world of Forex is the first step in being successful. Would you ever fix a leaky pipe without knowing how plumbing systems work? Why would you want to risk your money in Forex without knowing anything about how currencies work?

Unfortunately, most new Forex traders do just that. They open an account, deposit a certain amount of money and voila. They think they are ready to trade. Well, with 80% of beginners losing their money within a few days of trading, this is obviously not the best idea.

So here are a few tips for all those starting out:

  1. Learn the basics. Most brokers offer online tutorials. If this isn’t enough and you want to delve deeper and acquire more knowledge sign up for a more intensive Forex course such as FXAcademy.
  2. Speak to experienced Forex traders and see which brokers they recommend. Do your own research into the different brokers and see which ones offer the features you feel most comfortable with. There are also broker review sites that review brokerage firms and compare the various aspects that are relevant to a Forex trader.
  3. Look for a broker that offers a demo account. A demo account allows you to place real trades using virtual money. Over time, this account gives you the experience you need without the risk of losing your money. If the broker doesn’t offer a demo account, move over to another broker.
  4. Once you feel comfortable trading, open a real account and deposit the minimum required amount of money. Always start small.
  5. Don’t let your emotions rule your actions. Keep in mind that you will lose more than you will win at first. Be patient
  6. Develop a trading system that works for you. This includes knowing how to use trading signals through fundamental analysis and learning how to interpret graphs using technical analysis.

Trading strategies should be simple and easy for you to follow. Keeping to the strategy is key to successful trading.

What constitutes a good trading system? Here are a few tips:

  • When starting out, avoid day trading. Short term trading involves greater volatility and the odds of coming out ahead are small.
  • Don’t predict price movement. Base your trades on proper trading indicators such as support and resistance levels or use graphs that indicate price trends. Employ momentum oscillators and understand breakout methodology.
  • Place trade orders such as stop/loss orders to limit your risk.
  • Only invest what you can afford to lose and be prepared to lose.
  • Don’t use leverage. You will end up owing more than you started with.
  • Take small profits instead of waiting for big ones.