Forex Trading 101 – The Pros And Cons

Are you new to forex investing? Well, there are some things you need to know about this type of investing so you will understand better why a lot of people do it – from the big companies to individual investors.

There are three major reasons why people trade in forex: for money, enjoyment and a sense of achievement. It’s obvious that people can earn a lot of money through forex, but some people do it simply because it is fun and they feel a sense of satisfaction from making a trading system work for them.

All three reasons aside, people do forex because, unlike the stock market, the currency trading market never closes. Thus, no matter what time of the day and wherever they maybe in the world, anyone can benefit from trading currencies. You can even earn money in your sleep if you set up your trading system to work automatically.

It also does not cost much to get started. Some trading companies only require as low as $25 as an initial investment. The good thing about it is that you can trade up to 200 your initial capital. For example, you can trade $5,000 with only $25. You can’t say the same thing for stock trading.

Despite being profitable, forex transaction costs have remained low. This is very important. It wouldn’t make sense to have all your profit taken away from you with large trading costs.

How much can you potentially earn? In one word: unlimited. In case you didn’t know it yet, forex trading as a whole churns out $3 trillion EVERYDAY in trading volume. That means you can earn that much, if you know how to do it right.

There are many forex trading plaforms out there. Some are web-based while others require you to download their trading platform. There is nor right or wrong way to trade, however, whatever you do, make sure that trading currencies won’t tie you to a chair.

There are people who buy trading robots that automatically buys and sells currencies for them. You can set it up right away, however, if you really want to learn how to trade, you should first learn how the market works. There are many free ebooks out there being handed out by forex trading companies. Grab your own copy and start from there.

Like the stock market, you only trade with money you can afford to lose. Too many wide-eyed newbie investors have made and lost money in forex not know why it ever happened. To avoid any expensive mistakes, start with practice accounts or trade only the minimum capital then move on from there.

In all, forex trading can be compared to a double-edged swords where on one hand you can get maximum profits while on the other hand you can lose a lot of money. However, the good thing about it is that actual money doesn’t change hands until you make a withdrawal. In that sense, if you lost from buying high and selling low, you can always buy low and sell high.

Forex Tips For Beginners

Are you thinking about getting started with Forex trading? There are a few things you should know before investing on the Forex market. Take a few minutes to review the following article for some useful information on Forex.

Do not spend anything on Forex until you have spent at least a few months educating yourself about trading. Becoming a successful trader takes many years of practice and you will eventually get there if you start by learning as much as possible about Forex. You could for instance read some books, watch some tutorials or talk to other traders.

Choose a broker you can count on. Some brokers have a bad reputation for a reason. You should also avoid brokers that were created very recently. It is best to choose a broker with several years of experience and an excellent reputation, even if they charge more. Do not hesitate to call different brokers so you can ask a few questions about the services offered or find out how much opening an account will cost you.

Choose a currency pair in function of the kind of trading schedule you want. Expect to make most of your transactions when both financial markets are open at the same time. For instance, traders who use the American Dollar and the British Pound can trade from 8 am to 11 am. Once you choose your currency pair, you will have to learn as much as possible about the two countries and their economy.

You should be comfortable with the technical and the fundamental analysis. Professional traders usually have a method they prefer but you should not specialize in one method or the other until you gain more experience. As a beginner, you can really benefit from mastering both approaches. Besides, there are situations where using both methods is the only way to make an accurate forecast. Read analysis written by professional traders instead of following your own forecasts. You can write down what you think will happen and compare your predictions to what happened at the end of your trading session.

The key to becoming a successful trader is to always assess your risks and minimize them. There are different methods you can use to minimize your risks, including going with the trend, never investing more than half of your available capital and using stop loss orders. Following the trend is your best option until you gain more experience with trading. Never investing more than half of your capital means you will be able to recover most of your losses in case one of your investments turns out to be a bad decision. Using stop loss orders means your investment will be sold once it reaches a certain value. This is a good way to stop your losses or to secure the profits you were expecting.

These Forex tips will help you become a successful trader but keep in mind that you will have to work hard. Start by learning as much as possible about Forex.

Forex Scalping Success

I am not bragging or boasting when I claim that I am one of the few successful Forex scalpers. It’s a fat that most people never earn any money trading Forex, they can spend thousands of dollars on trading courses, they can ready every book on the subject but they will always fail.

These people fail because they don’t understand the pure basics that you have to discover on your own. They come to Forex lacking discipline and their lack of discipline is often the source of their failure.

Successful Forex scalpers have self-discipline a lot of other qualities that Forex losers do not possess.

How did I come to possess these qualities. Let me tell you something, I was an undisciplined person my entire life. I always made average grades, I was fat and I never finished what I started. All of that had to go out the window for me to succeed in Forex or anything else in life.

Why is discipline so important when you scalp Forex? It’s important because you can blow your entire account on one trade. It takes discipline to stick to your trading plan.

One of the most discipline related strategies in trading is money management. There are traders who always try to trade too big or who try to make up loses on one trade, they aren’t following a money management strategy and they will soon go broke.

No matter what happens during a trade, you should stick it out and go with your plan. Your plan should consist of an entry and exit strategy. You should know why you are in a trade, you show know when to exit it. These aren’t the decisions you want to be making while a trade is going on. This is when those two devils peer in to destroy you, fear and greed.

I promise that 100% of the bad trades you make are because of fear and greed. Fear that a trade is going to turn around on you, fear that you made the wrong trade, and your greed kills you when you try to trade too often, too much, and when you try to force more money from a trade.

Stick to your pre-trade game plan.

You do have a pre-trade game plan, right? Wrong! Most of you are just playing it by ear. Forex is your adult arcade game, it’s only entertainment.

All I have to say is, thank you for playing! Your deposit will soon sit in my bank account where I will use it to earn more money. Never forget that trading is a zero-sum game, someone has to lose for someone to win.

As you can see, most traders have no idea what they are doing, yet they still call themselves traders. They treat Forex like a video game and everything they learn is just entertainment. Most will continue to fail because they do not take themselves are the business of trading seriously.

They are fish in shark infested waters.

Forex Short Term Trading

I love forex short term trading. I know and often preach about not trading short term for beginners but I do know that you will trade short term anyway. Short term trading is fun, it’s high energy, and it’s exciting. I love to do it and I love the game of trying to outsmart the market. The problem with trading is that boring trading is good trading. Yes, if you’ve read my posts before you know that I always say that. What we gain the excitement of short term trading, we lose in profitability and stability. My goal with this article is to give you a short term trading method  that will be more profitable that anything that you are currently doing.

The technique that I will show you is very simple and easy. Because it is so simple, we will first focus on the extra things that will make you profitable. The extra thing that will help you is having the right mindset. The thing about day trading and intrday trading is that it should be done infrequently. The setups that give you daytrading plays do not occur that often. Guys who are always in a trade are making low probability gambles. We want high probability trades to maximize our forex profits.

So realize that you will not have many trades with this system. You have to mentally accept this fact to understand this form of trading. You will need to find peace in trading less often to be happy using most profitable trading methods in forex. For me it was a hard transition to make because I was a forex scalper. I was making around 100 trades a day. I was in and out of trades at such a high frequency. I was a speed trader.

Follow The Leader

Follow the leader is a technique that I learned when I worked at a prop trading house. We only traded short term. One of our methods consisted of the following things:

(1) Add the 20 SMA to your chart

(2) Add the 08 SMA to your chart

(3) Open the 5 minute chart

We will only make trades along the 08/20 SMA. We are using the 5 minute chart so that we will have more trades. We call this method follow the leader because past data has shown that price tends to follow a direct process. When you see 3 bars going all in the same direction, you can guess that price will continue to go in that same direction. We are look for 3 bar all going in the same direction and we will make a trade in that direction.

We will set our stop loss below the bar that got us in the trade and we will seek a take profit equal to the previous bar. This is a method that is very successful but you have to follow the system. It can also be used on higher time frames for more accurate forex trades.

I am going to teach you a very risky strategy that is either going to make you a lot of money or lose you a lot of money. I am the type of person who likes to takes risks. As semi-professional poker players, I was always a super aggressive player who would bully all of the other players. I was what they call loose aggressive. My approach to trading Forex isn’t much different. I take a lot of chances, I gamble, but I never lose my shirt. Yes, I lose money sometimes, but I never lose my shirt.

Never Lose Your Shirt

Before I go into the details of momentum scalping, lets first discuss the meaning of, never lose your shirt. In any game of risk, you must use proper money management. As a scalper, we are making tons of trades a day. We are basically making 100’s of gambles a day, so if we use too much leverage or two much of our account on each trade, we will go broke. Money management allows you to live to play another day or live to trade another day. Without money management, I would be in the poor house.

The Nuts & Bolts of Momentum Trading

First, lets talk about scalping. What is scalping? It really depends on who you are talking to. An old school pit trader might have a classic definition of scalping, while a modern computer based trader will tell you that scalping is getting in and out of a trade within minutes of executing it. There are even scalpers who are only in a trade for seconds. For this article we are talking about the modern type of scalping.

I call my technique momentum scalping because I only trade when the Forex market is super liquid.  I mostly trade when the New York open starts to around 11 AM. I am finished with trading by 12 PM every day. There are times when I trade the London open. To use momentum scalping only trade when the big banks are battling it our and moving currency around the different opens.

Momentum scalping is all about riding the big price moves and jumping in and out of them. From a chart point of view, I always trade the 5 minute chart. I find that this chart gives enough opportunities to make moves without the noise of say a 2 min chart.

We are looking for individual bars to immediately jump in price. This happens when a SINGLE bar goes from a small size to a really large size. We enter a trade right when it’s growing in size and we use our discretion as to when to exit a trade. I sometimes make 4 pips and jump out of a trade.

I also use some safe guard such as having a 8 pip stop loss and a 4 pip take profit. We only trade 1% of our account because this is a risky form of trading but it is fun.