If you are entering the world of Forex trading for the first time then you may well be starting to trade in the belief, as stated on almost every Forex website you visit, that trading offers a "risk free" profit and "high returns" for a "low investment". Well, there is certainly a grain of truth in these claims, but they do paint a somewhat simplistic view of trading which, in reality, is a little bit more complicated.
For most novice traders it is a case of opening an account and then diving straight into trading and, at this point, most newcomers make two mistakes. The first is to begin trading without any clear strategy for the trading decisions that they are making and the second is to let emotion rule their decision making. They pick a currency pair which they feel offers an opportunity for profit and jump straight in afraid that if they don't act now the opportunity will pass them by. They then watch as the market moves against them and close out their position in panic, only to then see the market recover. They've made their first loss and are probably far from happy.
Within the Forex market there are five major trading groups - governments, banks, corporations, investment funds and individual traders. Each of these groups has its own very specific set of objectives and more importantly, with the exception of individual traders, has a very specific set of rules and guidelines for trading and is held accountable for the trading decisions it makes. This leads to very disciplined trading and, more often than not, is why the larger trading groups are so successful.
To succeed in Forex trading the individual trader, having taken the time to study the currency markets and to learn the ins and outs of foreign exchange trading, must adopt a very disciplined approach to trading and must trade to a clearly defined strategy and philosophy.
Trading decision should never be based upon emotion and should only ever be made on the basis of a trader's knowledge and experience and a sound analysis of current market conditions. In particular a trader needs to apply his technical knowledge to the analysis of charts and to carefully and clearly plot out the points at which he will both enter and exit each individual trade. Doing this will not only maximize his profits but, most importantly, it will minimize his losses.
There are certainly substantial profits to be made in the Forex markets by individual traders but, to achieve these profits, two things are required. The first is a knowledge of the Forex market which can only be gained through study and experience. The second is a clear trading philosophy which gives a firm sense of direction to your trading decisions.
By David Shephard
No comments:
Post a Comment