How to trade in Forex
Below are some tips that can help you become a successful trader in the Forex market. These tips will help you understand how to trade on Forex, especially if you are an absolute beginner.
Invest what you can bear
One of the best tips for any new trader is to start with small amounts and only increase the capacity of your account with your profit - not by further deposits. You don't have to invest a large amount to earn profit - you can maximise your investment however small it is. By starting out small, you cut down the risk of heavy losses when large volumes of cash are involved. This is an essential part in understanding how Forex works and how to trade Forex online.
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Forex Trading Tips: Tricks of the Successful Forex Trader
For all of its numbers, charts and ratios, trading is more art than science. Just as in artistic endeavors, there is talent involved, but talent will only take you so far. The best traders hone their skills through practice and discipline. They perform self analysis to see what drives their trades and learn how to keep fear and greed out of the equation. In this article we'll look at nine steps a novice trader can use to perfect his or her craft; for the experts out there, you might just find some tips that will help you make smarter, more profitable trades too.
Define your goals and choose a compatible trading style
Before you set out on any journey, it is imperative that you have some idea of where your destination is and how you will get there. Consequently, it is imperative that you have clear goals in mind as to what you would like to achieve; you then have to be sure that your trading method is capable of achieving these goals. Each type of trading style requires a different approach and each style has a different risk profile, which requires a different attitude and approach to trade successfully. For example, if you cannot stomach going to sleep with an open position in the market then you might consider day trading. On the other hand, if you have funds that you think will benefit from the appreciation of a trade over a period of some months, then a position trader is what you want to consider becoming. Just be sure that your personality fits the style of trading you undertake. A personality mismatch will lead to stress and certain losses.
Choose a broker who offers an appropriate trading platform
It is important to choose a broker who offers a trading platform that will allow you to do the analysis you require. Choosing a reputable broker is of paramount importance and spending time researching the differences between brokers will be very helpful. You must know each broker's policies and how he or she goes about making a market. For example, trading in the over-the-counter market or spot market is different from trading the exchange-driven markets. In choosing a broker, it is important to know your broker's policies. Also make sure that your broker's trading platform is suitable for the analysis you want to do. For example, if you like to trade off of Fibonacci numbers, be sure the broker's platform can draw Fibonacci lines. A good broker with a poor platform, or a good platform with a poor broker, can be a problem. Make sure you get the best of both.
Calculate your expectancy
Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners versus losers. Then determine how profitable your winning trades were versus how much your losing trades lost.
Take a look at your last 10 trades. If you haven't made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made. Here is the formula:
E= [1+ (W/L)] x P – 1
where:
W = Average Winning Trade
L = Average Losing Trade
P = Percentage Win Ratio
Example:
If you made 10 trades and six of them were winning trades and four were losing trades, your percentage win ratio would be 6/10 or 60%. If your six trades made $2,400, then your average win would be $2,400/6 = $400. If your losses were $1,200, then your average loss would be $1,200/4 = $300. Apply these results to the formula and you get; E= [1+ (400/300)] x 0.6 - 1 = 0.40 or 40%. A positive 40% expectancy means that your system will return you 40 cents per dollar over the long term.
Source:www.investopedia.com/articles/forex/08/successful-trader-traits.asp#ixzz4vabFlWGi
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