The popularity garnered by currency trading over the past decade has been truly amazing, considering the high risk involved and the propensity for early failure by beginners. The “craft” is like every other skill-oriented profession – success depends on knowledge, experience, and the ability to block emotional intervention in the process. Trading in any investment arena requires a disciplined approach, but forex trading tends to amplify the need for cold, hard, business-like decision making due to the stressful nature of trading conditions.
The common sense advice above is the result of years of trading experience, freely offered to interested newcomers. If you fall into this category, then here are a few other things to know on the front end:
- Am I cut out for forex trading? There are many trading styles in the forex world, from the active day trader that opens and closes multiple positions in a single day, to the swing trader that holds onto trades for days at a time, to the position trader that looks to long-term trends to produce his gains. It is best to match your personality with one of these trading styles to see if trading is for you;
- How do I choose a trading style? There are many forex brokers that will provide you with “virtual” cash and a free demo account trading system to practice and refine your trading skills. Study their tutorials, read everything you can, and then get acquainted with their trading platform, its technical indicators and charts, how to execute an order and close a position, and then follow your progress;
- Are there any shortcuts to practice? The simple answer is “No”. Experts take anywhere from three months to longer to gain the necessary confidence and consistency with their individual trading plans before risking real capital in the market. You must put in the time to become familiar with the vagaries of the market and trading process. Practice will point you to the style you naturally prefer. The only known “shortcut” for experience is to find a “mentor” to guide your training progress and counsel your effort down the road;
- What is a “disciplined approach” to the market? Every trader must have a “step-by-step” trading plan that dictates how to recognize an opportunity, how to assess the risk/reward, when to enter the market, how to determine the prudent amount for each position, how to employ risk management techniques to advantage, and last of all, when and how to close a position. Follow the plan religiously. It is the only proven way for blocking your mind from undermining your best-laid plans.
Unfortunately, the majority of beginners get impatient, jump into the market with real money and intuition alone, and then crash and burn, never to return again. Losses are part of the action and must be minimized early, so that “winners”, when they come, can recoup your losses and produce net gains. This is the “formula” for currency trading.
Risk disclaimer: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
If you do not physically tear, shred or burn a will, destroying a will remains void. You must destroy the will yourself or in your presence in order for it to count and then you can start over.