The Foreign Exchange Market
it is the largest currency market; it spans the globe as an interwoven and continuous market.
There is a multitude of pitfalls waiting for the novice Foreign Exchange Market Trader to fall into and there are typical mistakes that the beginner makes. This is a guideline to help the starter Forex trader avoid the most common mistakes. Always remember, it sounds far more complicated to the inexperienced ear than it is in reality, but this is an important subject, therefore you need to comprehend and follow basic guidelines if you hope to succeed.
There are many regulated Forex brokers online and this can be bewildering to the Forex beginner to be able to choose a creditable one from all available on the Forex trading platforms, software etcetera. You must make a smart and knowledgeable decision when you choose a broker, but you should not get bogged down in a long-winded, complicated and difficult process. The goal is to get started on your trading, not to stumble around aimlessly trying to choose the right broker.
There are more than fifty regulated Foreign Exchange Market brokers available who offer their services to the novice Forex trader and the following are the important factors to consider when you make your final decision.
• How fast and comfortable is the process of opening a trading account and can you use your credit card or a money order.
• What accounts are available: do you have the option of a mini-account or a demo account or is the only option a standard Forex account, for you need to start out with a mini-account and not a standard one.
• Bid or ask for a pip spread on the major currency crosses/pairs which is EUR/USD, USD/CAD, AUD/USD.
• Take a good, in-depth look at the trading software. It must be user friendsly and easy to understand, you do not need the add difficulties in your life of complicated and difficult to handle software.
• Make note of the minimum trading amount. This is important that it is between five thousand and ten thousand USD, especially for mini-accounts.
• Check up on the hours of operation that the broker offers; the standard for this is 24-hours per day over a 5 day week.
• What is the initial deposit? An amount between one hundred and five hundred dollars is more than adequate to start out with and therefore the Forex broker’s minimum deposit size should not be larger than between two hundred and fifty to five hundred dollars.
• The transparency of your broker’s trading platform is important, so make sure there are no hidden costs. Your broker should not cheat you, he is there to help you get started.
As with any Forex beginner, your initial knowledge will be scant therefore it is advisable to look for those regulated Forex brokers that give away free e-books and e-courses. These courses and guides are invaluable for you to gain knowledge about the basics of Forex trading. Make sure these cover all the crucial information that you will need to be able to start as a Forex trader.
Lastly, choose an uncomplicated Forex broker platform and not one that must be downloaded to your hard drive. Keep it simple and user-friendly, you do not need a system that is full of bugs and unreliable.
In Forex trading there are currency basics and for the beginner the following are common mistakes to avoid if he hopes to become a successful trader over the long term.
Day Trade: Do not day trade as this does not work for all short term volatility is random and prices bounce everywhere during a day; the odds are against you and this leads to losses in the long term. Concentrate on long term trading where the odds are on your side. There is no such thing as a rich day trader; this is a long term game for it to be successful.
Prediction: you cannot predict what the prices will do, it is simply impossible. Prediction is simply guessing. The only way to trade is by the reality of price changes.
Science: it is a myth that markets move according to a scientific formula. If this was the case there would be no market, science in trading does not exist. Trading is a game of odds, you win some and you lose some, but over the long term you can be profitable.
Trading Scared Money: never trade if you cannot afford to lose. Forex markets are risky and you have to be disciplined. Once you start to trade scared, you will lose.
Being blinded by a Swami: You must have confidence in the trading system you are using. Never blindly follow what is being toted as simply the best. Know your system and exactly how it works and follow it with discipline.
Experts: Do not believe everything you read. Newspaper articles are hype written by journalists to sell newspapers. Most of the time they have no idea about the Forex market, and they create false impressions about upswings in the market.
Buying low and selling high: this is a great theory that does not work at all. Market moves generally start from new market highs; learn when to buy when the odds are in your favour as you can usually see trends develop if the breakout is from a valid resistance level.
Complicated Systems: stick with simple trading systems as they work the best. Forex market conditions can be brutal and using a complicated system and using a complicated system with too many inputs will cause chaos.
Knowledge: you do not need to get bogged down in excess general knowledge in Forex trading; you need the right knowledge. Be specific, get to know your trading and you will be a success.
Overtrading: Novices tend to think that the amount of trades is important; this is a sure way to lose. Do not trade for the sake of trading, wait patiently and only trade high odds set ups. Patience and discipline are the keywords.
If you ever hope to become a successful Forex trader you must learn to avoid the above mistakes. Lean to trade correctly; be aware of the pitfalls when you develop your Forex trading strategy. Avoiding the common errors that most novices make will set you firmly on the road to success and regular profits.
Charts are an important part of the life of any Forex trader. It is not a science, but more of an art form and the novice must learn the basics to be able to do Forex technical analysis if he wants to trade confidently and become a successful Forex trader.
The following are chart basics that you must learn and understand.
Time frame: you must pick your time frame. Day trading does not work, the time period is too short. Decide on either long term trends or the Forex swing trade. Long term trends have a potential for larger profits, but needs strict discipline and patience. The swing trade is more frequent and does not require the same level of discipline.
Simple is the Best: always keep your Forex charting system as simple as possible, it works far better than complicated ones. Simple charts are rugged and do not incorporate too many elements that can break.
Prediction: you cannot predict with Forex charts, you are only guessing and hoping and you will fail if you think this way. You need to confirm each move you make with price action.
Support and Resistance: this is a crucial part of your Forex education; you need to understand it to be able to use it and you must use it, it is essential in Forex trading. Your trading needs valid support and resistance. You must do as many tests as possible using different time frames. If it shows valid, you can trade into it; look for the breaks and catch the new trends.
Confirmation: you must confirm and not predict. You must trade the reality of price changes; you do not just jump in and hope that support will hold. You must wait for a turn in the price momentum and use leading indicators such as ADX and RSI.
Breakouts: most of the time big trends start from new market highs, it is not usual to start from market lows. Do not buy low and sell high, the way to become profitable is to buy high and sell even higher. This is something all successful Forex traders have learned.
Be Objective: when you have to make too many subjective judgments, ignore the indicators. Rather go for combined indicators that give you a clear, positive trading signal and never go for cyclic indicators that risk you getting emotionally involved.
These are the basics about Forex charging you must know and use. This should form the basis of your Forex trading system and should guide you as to how and when to make trades. Always remember to keep it as simple as possible for the simple systems work far better than getting bogged down in needless complications. You must know and understand Forex charting and use easy to apply charting. The cardinal rule that govern all traders is to keep your emotions out of ALL your trading transactions; if you forget this, you are doomed to failure. Forex trading is a game of chess, waiting patiently and being disciplined at all times.
a useful tip:
The world admires too clever people, they are looked up to and expected to have the answers. This very character trait will make you a big-time loser in the Forex trading game. In the Forex trading game, when a trader tries to put in too much effort, be too clever, he loses. Traders try to build far too complicated systems; they cannot understand that simple and rugged works the best, every time. With trying to be too clever comes the other part; the ego. Traders will not accept that they are wrong, their ego wont let go. This is a deadly combination; too clever and the ego. This will wipe you out; this statement is not a speculation, it is a proven fact.
Simplicity: We now have access to the most incredible technology for communications and software, yet the ratio of winners to losers in the Forex game is no different than that of 50 years ago. This shows clearly that applying advanced knowledge simply for the sake of knowledge does not give you any edge whatsoever. The answer is to keep it simple; simple is rugged, rugged leaves less elements to break down and this leads to higher percentages of success.
The biggest mistake clever people make is that they are under the delusion that they deserve to be winners because they are smart. They hate to be wrong, they cannot stand it when their clever plans do not pan out, and they feel they are being made to look stupid by the Forex market. All traders have to learn this fundamental truth; they will lose at various times during their trading careers. You have to accept this, deal with it and move forward. The only right price is the market price, not what you think it should be.
You cannot fight the Market: the market is an all powerful juggernaut; it moves where and how it wants. You cannot fight the market; you will end up battered if you refuse to take losses. And if you over ride your system in your arrogance and rage at the market, you will end up losing your equity and end your career in failure.
Be Sensible: Compare your career to a ship sailing the high seas. Any sensible captain is fully aware that the sea is a treacherous mistress who does not care if he sinks or floats. On the other hand, the captain who knows the rules and obeys them are able to navigate his ship with its precious cargo to safety and have his ship intact to sail on the next journey. Therefore, be sensible, play by the rules for you cannot fight an unfeeling market, it will destroy you without even noticing your demise.
Choices: Decide for yourself if you want to be clever or if you would rather make money. Do you want to fight the all powerful market and lose everything or are you going to obey its rules and become a profitable trader.
Learn that you must work smart and not hard, keep it simple and drop that ego. Being humble is not a sin, accept the truth that the market presents to you, obey the rules and you will navigate the ups and downs with great success.
The choice is yours; a winner - or - a loser.