The Foreign Exchange market makes up the world’s largest global marketplace and trades 24 hours a day from Sunday afternoon to Friday afternoon. Nearly 5 trillion dollars exchanges hands every day in this market.
The modern technology available today has made trading the forex market much easier for the professional trader. At the same time, this technology is giving beginner and less well-funded individual traders the chance to trade in a market that was once the exclusive domain of large banks and international corporations. There has never been a better time for the individual trader to be learning to trade the forex market.
Whether you are a professional trader, or brand new to this market, there is no shortage of myths available to make you question your ability to succeed as a forex trader. These myths can have an impact on anyone, no matter how long they have been trading in the markets. Unnecessary frustration can be avoided by knowing some of the major myths and avoiding the pitfalls they can sometimes cause.
Many people who are looking to get rich quick with little or no effort on their part, have been brought into the forex trading arena due to advertising that has rapidly expanded the retail forex market. However, striking it instantly rich is very rare. Trading takes time and patience and there is no ultimate and final destinations. Rather than making huge sums of money and then just walking away, traders make trade after trade, and this requires consistency, even when there are time gaps between trades. Trading is not gambling. It requires a methodical plan of consistent learning, analyzing, practicing, and placing of trades.
Although high leverage has made it very popular to place short-term trades in the forex market, this is not the only trading strategy available. Longer trends in the currency market are driven by fundamental forces and create very tradable trends. Those who choose to trade the long term trends are not concerned with the everyday fluctuations in the market. Long term trading may be beneficial to some traders as it can reduce the amount of commissions paid, and traders are more likely to avoid placing short-term trades on impulse
When traders lose money, they are often quick to look for someone to blame. Losing traders will often use a rigged market or a corrupt broker as the reason for their lack of success in the markets. While this can be an easy assumption to make, trading the foreign exchange market is no scam. With close to $5 trillion changing hands everyday between hundreds of thousands of transactions, this market is by far the largest in the world. This means that if you take a lazy approach to your trading, one of the traders with a more businesslike approach will probably notice this very quickly and capitalize on your mistake – this is just how it works in the markets.
If someone tells you they can teach you how to trade and win 100% of your trades, run, because they are not being honest with you. Every trader experiences loss on occasion, and attempting to find a strategy that will win every time will either keep you out of the markets altogether or leave you in a position where you will not be able to adapt to new market conditions. Practicing good money management skills and proper trade protection will allow you to minimize your losses on a losing trade and capitalize on the profits of your winning trades. Accepting that losses do and will occur needs to be a part of every trading strategy.
More is not always better when it comes to trading. While it is tempting to think that if we make money trading once a day, then we can make 10 times as much if we trade 10 times a day, that will probably not be the reality for most traders. It is important to remember that every time we enter a trade, we risk losing money on that trade. For that reason, it is important for each trader to develop a strategy that they can become highly skilled with, and then set a trading goal to go along with that strategy. Once the goal has been met, the trader needs to be done for the day. Getting greedy never turns out well in the markets.
The next, best, greatest strategy may not be what’s best for you as an individual trader. Most traders begin with a very simple strategy that they will see a small return on . At this point traders will often begin to tweak their strategy, mistakenly thinking that if it is more complicated, it will yield greater results. This may work for seasoned traders, but is risky, even for them. Once you create, test and find a strategy that works for you, patience becomes very important. As your account size grows, and your leverage increases, you will naturally start to see bigger and bigger returns on your trades. By sticking with a simple strategy that works for you, and then being patient as your account grows, you can minimize your losses and become a master trader at your personal strategy.
Money management is by far the most important factor in becoming a consistent and profitable trader. It does not matter how many trades a person wins, if they don’t know how to manage their losing trades. Money management may begin with placing a stop loss, but goes far beyond that. Money management incorporates knowing how much of your total account to risk on a trade, how many trades can be open at the same time, lot size and win percentage. Ignoring money management will result in failure, even with the best trading strategy.
The key elements that we look for in a good trader are patience; ability to listen, learn and be taught; willingness to follow rules; persistence, and diligence. While a general idea of economic concepts may be helpful, many highly successful forex professionals actually come from backgrounds that have nothing to do with economics.
Thanks to the availability of online trading, and high-tech trading platforms that are available to the individual trader, it takes less time than ever to trade on the forex market. A trader no longer needs to be watching their computer monitors 24 hours a day to manage their personal trades. You simply place your trade with a take profit and stop loss in place and the broker handles the rest. Gone are the days of time consuming trading. You can now meet your trading goals in a matter of just a couple of hours a day