Thursday, January 17, 2008

Forex Trading

Basically, this type of trading looks easy.. So easy in fact that you think (quite incorrectly) it would be a breeze to just take $100-$220 per day. It is said that the forex markets turnover well in excess of three trillion US dollars every day. However, the hard part is to know when to get in and more importantly when to get out. My trading experience has been fraught with little disasters. Disasters like entering trades that immediately take off in the wrong direction the very second that you enter. You watch this thing like you are in a trance thinking it s got to change direction soon. Then after you ve lost 30 or 40 pips you panic and think I ve picked this wrong and hit the stop button. Of course that is the signal for the trade to reverse direction. You, however, are no longer on it and the trade goes on to infinity and you could have made 200 pips. The other scenario is the classic mistake. You haven t exited the trade and you are so relieved that the direction has changed that you bale out with a smaller loss or at break-even. All this is bad planning and ill discipline. Forex trading is not for wimps and you are going to lose trades on plenty of occasions. So get used to it. The trick is to make sure that the winning trades run there course to a realistic maximum and the losing trades are stopped out according to a predefined limit. Walk away from a bad trade and just move on to the next one. Forget it and never try to adjust things or double up or any of those other gambling techniques. Take a break, even leave trading until another day. There are always other trades. The fact is most people over trade. They either get bored and go looking for trades with marginal chances of success or they feel that they need to be working away at it to justify there status as a trader. The more you trade the higher the probability that you will lose. Some of the most successful forex traders just trade a few times per month. They select their battle ground and if the circumstances are right they trade. If they are not right or marginal they wait for the next good opportunity. The fact is that there are good opportunities for forex trading many times each month. You don t have to trade every minute of every 24 hours and your body won t thank you for extended sessions of high tension in front of the computer screen either. The best advice is to find a good advisor. Check their track record and follow their trades. There are lots of methods and advisors out there. Find the one that best suits you and follow the plan without deviation. Paper trade to begin with to make sure that it is profitable and resist the urge to take diversionary side trades. Be disciplined and if possible choose a system that you can set and leave. It is so much easier and safer in the long run. Michael Jay writes articles on a range of subjects but has a special interest in mortgage finance and forex trading. You can find more articles on Forex Trading and information on a Free Forex Trading system at

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