Whether you’re a futures broker, mortgage broker, banker or stock picker, Forex trading is an essential part of a trader’s portfolio. The Forex market is a risky, volatile and yet, extremely lucrative market. Data shows that 90% to 95% of Forex traders lose money in the first year of trading. So, you ask, why should the Forex even be considered a part of a well-rounded portfolio? It is because trading the Forex has the potential to make anyone thousands of dollars a month.
Only recently has the average person been allowed to trade in the Forex market. Now, even a mini account can be opened and with little as $300 and off you go. With one caveat; if trading the Forex market were easy, then everyone who trades it would become a millionaire. Forex trading requires vigilant market analysis and in general, there are two approaches to this.
The first trading method is known as fundamentals. Fundamentals rely on government reports such as trade deficits, changing interest rates, CPI numbers, retail sales and supplies of raw material. Forex traders will make a projection for upcoming data and place trades based on their speculations of that data. Fundamental traders also rely on trade floor rumours and breaking international news events.
The other type of Forex trading method is what is known as a technical trader. Forex technical traders rely on charts and mathematical formulas to place their trades. Their belief is that history and price direction repeats itself. Based upon these historical patterns traders can use them to predict price movement in the future.
The information about Forex presented here will do one of two things: either it will reinforce what you know about Forex or it will teach you something new. Both are good outcomes.
How Should You Trade
There is no proven, foolproof method for trading. Some people claim to have found, “the answer”, to currency trading. However, my experience shows it may be best not to try and reinvent the wheel. Learn with a tested system and follow a simple, reproducible, proven money-making plan. From this, you can develop your own style or method of trading. Decide when the best time to trade is, develop a good money management system and set goals. A lot of experienced Forex traders trade when the London and New York markets overlap, between the hours of 8:00 am EST and 12:00 pm EST. They trade during these hours because the market moves around a lot and becomes extremely volatile. Most long-term Forex traders have learned how to become extremely good at trade management.
Beware the Emotional Trade
One key to success in trading any market is to keep your emotions in check and thus lower your anxiety level. It is said that psychiatrists often make better traders than economists for this very reason. A true Forex trader will discipline themselves to stick to their trading style regardless of what happens in the markets. You must plan a trade and then trade the plan. People too often feel after a few short months of trading successfully in a demo account they are ready for the real thing. Take your time and really learn how the Forex market works as your long term success is at risk.