Sunday, December 30, 2007

Forex Trading Made Easy

Are you kidding me? Forex trading isn't easy, it's about as risky a financial endeavor as you can legally participate in.

Wait, let me rephrase that... foreign exchange trading is easy, success isn't. Yeah, that's right, that's my tag line. It's true.

If you are looking for the easy button, here are some platitudes for you:
  • Buy low and sell high.
  • Have inside access to national economic reports.
  • Witness a major international incident prior to the news reports.
If you are willing to work hard, be patient, and work to preserve your capital, then here are some more helpful suggestions:
  • Wait for a buying opportunity before entering a market.
  • Manage your risk via position size and stop loss orders.
  • Learn to recognize when you should not be trading.
Waiting For A Buying Opportunity
If you don't know how to recognize a buying opportunity, then you need to be playing with funny money still. Perhaps there has been a big movement recently. Perhaps there is a news release on the way. Perhaps you have noticed a trend and your indicators are giving you signals. Whatever the case, don't just throw your money at the market and hope for a profitable move.

Managing Your Risk
It's easy to get fully invested. Heck, if you are careless you can do this in one trade. If you aren't careful you can blow up your entire account within minutes. Sure, you do have to take a risk every time you enter the market, but you don't have to take huge risks in order to achieve significant returns on your money. Make sure you are around for the long haul because eventually the market will make a move in your direction.

When Not To Trade
Generally, when you are having a bad day, whether because of the markets or otherwise, it is a good time not to trade. If you are bored, stressed, emotional, desperate , depressed, or angry, you are very likely to make poor decisions. All it takes is one unlucky rash decision to lose your capital. The forex trading game is one that requires vigilance and discipline. Know yourself.

Anyway, today is Sunday, so I can't trade just yet. What do I do on Sunday? I think about potential trading strategies. I look forward to the day when I have real capital in the markets and am making a serious income. I review my previous ill fated forex trades. I write in my blog.

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