The Foreign Exchange Market
it is the largest currency market; it spans the globe as an interwoven and continuous market.
Forex trading has the reputation for chewing up beginners and spiting them out as failures. Facts are that most beginner traders lose their money in the first year of trading and after that period 9 out of 10 give up on the Foreign Exchange and give up the idea of being traders for good. If you want to succeed and become a reputable trader, learn from the mistakes of others.
Trading Pitfalls
Outsmarting the market.
Trends.
Good days versus bad days.
Emotions.
Outsmarting the market
Engrave these words deep into your mind; you cannot outsmart the market. Most beginners have the attitude that they can outsmart the market and pay for this arrogance with failure. Forex is huge; 3 trillion dollars trading per day, every day. There is not one single factor that affects the movements of currency rates only, there is not a master indicator that will predict top and bottom markets. Instead there are countless technical and fundamental indicators that affect trading. Remember this; size does not matter. The size of the deposit is not going to affect how trading goes.
The other cardinal rule; do not trade against a trend. “Trend is your friend”, remember that. You need to recognise the trend, identify it and then stick with it, never trade against it.
Daily trading – trend is weekly or two/three week trends.
Medium term trading – trend is monthly and/or quarterly.
Long term trading – the trend is yearly.
Good days versus Bad days
Every day will not be a profitable trading day; that is impossible. There are many bad days between the good trading days. It does not mater if you are a long-term trader, medium-term trader or intra-day trader; there will be bad days, or weeks or even months. That is all part of the trading game and this is true for ALL types of trading; spread trading, futures, stocks and Forex.
Setting yourself specific monetary goals will result in failure; you cannot tell yourself $200 per day at all costs. This will not work and you will simply increase your failure as you enter and re-enter a bad market over and over, losing the profits you have made previously, until you lose your deposit. You must be prepared for bad days, or weeks and even months. Do not become despondent, this is normal for the Forex market, so do not give up. You will learn to recognise the good days and then utilise them to make a good profit.
If you allow greed or fear to come into your trading transactions, you are setting yourself up to be a long-term loser. Discipline is the foundation-stone for Forex trading. You stick to your strategy; stay with a specific strategy for a period of two to three months. Changing your strategy daily or weekly shows total lack of discipline; it means you have no strategy at all.