Your Forex Trading Philosophy

Your Forex Trading Philosophy

"Easy money" is the allure that captivates many beginning FOREX traders. FOREX websites offer "risk" trade, "high returns", "low investment." These claims have a grain of truth in them, but the reality of FOREX is a bit more complicated.

Errors at the beginning trader

There are 2 common mistakes that many beginner traders make: Forex Trading without a strategy Forex and letting emotions rule their decisions. After opening a FOREX account it may be tempting to dive right in and start Forex Trading. Watching the movements of EUR / USD for example, may feel that they provide an opportunity to pass, if you do not enter the market immediately. You buy and watch the market moves against you. You panic and sell, only to see the market recover.

This kind of undisciplined approach to FOREX is guaranteed to lose money. FOREX traders must have a rational Forex Trading strategy Forex and not make Forex Trading decisions in the heat of the moment.

Understanding market movements

To make rational Forex Trading decisions the FOREX trader must be well educated in market movements. He must be able to apply technical studies to charts and plot entry and exit points. He must take advantage of the various types of orders to minimize risk and maximize her own profit.

The first step to becoming a successful FOREX trader is to understand the market forces behind it. Who trades FOREX and why? This will enable you to identify successful Forex Trading strategies and use them.

Responsibility

There are 5 major groups of investors who participate in FOREX: governments, banks, corporations, investment funds, and traders. Each group has its own objectives, but 1 thing all groups except traders have in common is external control. Every organization has rules and guidelines for Forex Trading currencies and can be held accountable for their Forex Trading decisions. Sole proprietors, on the other hand, are accountable only to themselves.

Large organizations and educated traders approach the FOREX with strategies, and if you hope to succeed as a FOREX trader you must follow suit.

Money Management

Money management is an integral part of any Forex Trading strategy Forex. Besides knowing which currencies to trade and how to recognize entry and exit signals, the successful trader has to manage his resources and integrate money management into his Forex Trading plan.

There are various strategies for money management. Many rely on the calculation of basic equity - your starting balance minus the money used in open positions.

Core capital and limited risk

When entering a position try to limit the risk from 1% to 3% of each transaction. This means that if you are Forex Trading a standard FOREX lot of $ 100,000 to limit the risk to $ 1,000 to $ 3,000. You do this with stop loss 100 pips (1 pip = $ 10) above or below your entry position.

As your core equity rises or falls, adjust the dollar amount of risk. With a starting balance of $ 10,000 and 1 open position, your core equity is $ 9000th If you want to add a second open position, your core equity would fall to $ 8,000 and should limit the risk to $ 900th Risk in a third position should be limited to $ 800.

Higher profits, higher risk

You should also raise your risk level as your core equity rises. Mon $ 5,000 profit, your core equity is now $ 15,000. You could raise your risk to $ 1,500 per transaction. Alternatively, you can risk more in earnings than the original starting balance. Some traders may risk up to 5% against their realized profits ($ 5,000 to $ 100,000 lot) for greater profit potential.

These are the kinds of strategic tactics that allow a beginner to get a foothold on profitable Forex Trading in Forex.