There are three general things you must have in order to be a successful forex trader:
You must have a good forex system
You must have a good system. The system should be profitable in the long run and must be easy to implement. It should be of a mechanical nature, allowing little or no discretion or judgment from the trader´s part. Especially if you are a starting trader, it is important that you follow mechanical rules: if A=B then C, if not D. As a machine. The reason for this is simple. There a lot of emotions that come into play when trading forex. If you have a set of rules to follow then you know exactly what to do and no matter what your feelings are telling you, you can ignore them and simply follow the precise rules dictated by your system.
You mut have a good set of money management rules for your forex trading system
Trading is not only to have a good system (of course that is very important) but also about having a good set of money management rules and principles. Trading without following these precise money management rules is a sure way to fail as a forex trader. The term money management refers to the principles and discipline you use in order to control your risk exposure when entering a trade. How much of your total capital you will risk on any individual trade, where you will place your stop loss, where you will place your profit objective and the ratio between your profit objective.
You must be able to control your emotions while trading forex
This is very important rule a trade must learn to master. While trading, you are constantly presented with feelings such as fear, greed and excessive excitement. The reason many traders experience these types of feelings is simple, the don´t have a good trading plan. They don´t have a good and clear set of rules to follow. They will trade based on emotions rather than on signals issued by a profitable system. They will not respect stop losses, profit objectives or any other important parameters essential for profitable forex trading.
In forex or in any market Intraday Trading means to trade in short times. For example, to open a trade at 10.00h and close it at 10.30h or so. Also you can do scalping that is the same but to open and exit a trade within seconds or a few minutes.
Day trading means trade for one day to another. For example you open a long in gbp/usd at 1.6800 on monday, and close it on tuesday at 1.6950, for a profit of 150 pips.
Each trader has to know wich style of trading is better for him. A lot of traders feel comfortable doing scalping or intraday, and others can´t do that and they do daytrading.
Day trading is easier but you have to forget about the market noise and have to have the patience for waiting until the price go for your target. In IntraDay trading you can find little trends in minutes or hours, and close until the next day.
If you are new, perhaps is better day trading, but you have to trade to know what is comfortable and easier for you.
Forex or Fx Market offers today’s investor many advantages and here are just some reasons why you might want to become a world currency trader:
- A Market Which Never Closes. Many of the trading markets around the world are situated in fixed locations and operate within strict trading hours, often limited to just five or six hours a day between Monday and Friday. The Forex market however is open 24 hours a day. This means that traders can take advantage of international events and react literally as they happen. If you prefer to work in the mornings then that’s fine but, if this doesn’t suit you, then you can choose to trade during the afternoon, late evening or even in the middle of the night if you want to. Also is very important that you can´t see any gap in the forex market. Only is important to stay close before the friday season ends, because it could be a gap at the start of the monday season (any important financial news in the weekend could move the forex).
- Low Trading Costs. In many markets, like the equity market, traders not only have to pay a spread (the difference in price between buying and selling a stock) but also have to pay a commission to the broker. On small trades this commission can typically be about $20 and this can rise rapidly to over $100 for larger trades. In Forex many of the traditional trading costs are eliminated and you are in affect reduced to paying nothing more than the spread. In addition, the extremely liquid nature of the global currency exchange market means that spreads are normally much tighter than those seen in other markets.
- The Ability To Trade On High Leverage. In most markets where a trader has an opportunity to trade on leverage the leverage offered is often quite low. In the case of equity markets, for example, professional equity day traders will normally operate on a leverage of about ten times their capital. In forex you can trade at one hundred to two hundred times their capital. A downside of high leverage is that it can of course lead to high losses as well as high gains. However, within the foreign currency market, risk management is extremely tightly controlled with the stop losses and high discipline.
- Limited Slippage. In currency trading trades are executed immediately using real-time prices at which firms will buy or sell the currencies quoted. In almost all cases this means that the price you see and the price you pay are the same. In others markets can be often considerable delays between placing an order and that order being executed during which time the price will often move against you.
- Profits easily come trading long position (buying) or short position (selling). Equity markets follow rising and falling trends (cycling between Bull and Bear markets), but the Forex market does not suffer this cycling which comes from structural bias in the market. World currency trading always involves two currencies so that if you are down on one currency then you are up on the other. There is therefore always the potential for making a profit whether the market is rising or falling.
Foreign Exchange (FOREX of Fx) is the arena where a nation’s currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers.
Traditionally, retail investors only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets.
At this time, in the Forex markets the little speculators, traders as you, can participate with the same conditions as the “bigs”. A lot of brokers allow the “real” traders to do it. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, most of brokers allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.
