Among all the capital markets in the world, trading foreign exchange can be one of the most stressful. It’s not like the stock market, where there is an “opening bell” and “circuit breakers” to stop cascading losses. It’s not like the futures market, where there is a “closing bell” and a “limit” to daily losses. It’s not like the real estate market, where you can leverage your investment highly and not worry about your market value fluctuating on a minute-by-minute basis. Forex is unique: it’s global, doesn’t stop and has no central regulatory power to artificially set “floors” under a loss-producing situation. For all these reasons (and more), using a “demo account” before you start “live trading” is a very good idea. A “demo” is just like a real account except you use “virtual money” and not your own.
Expert foreign exchange traders have a trading plan and at least 1 consistently successful foreign exchange trading strategy. They are willing to wait for the market to come to them – not vice versa.
What Makes A Good Foreign Exchange Trader
An expert foreign exchange trader views the market dispassionately and is only interested in making a trade that has a high chance of profitability along with a low chance of incurring a loss. In other words, he/she is viewing each potential trade as a ratio (i. e., “I could possibly make this much profit in return for taking on this much risk”). When you view trading this way, a couple of things happen: 1) you don’t trade every possible trade; 2) you modulate your leverage to fit the apparent volatility involved; and, 3) you may only trade on Tuesdays, Wednesdays and Thursdays (when trade volume is usually excellent and the chances of getting a “good trade fill” are the same).
Why Trading Foreign Exchange Is Such A Nerve-wracking Process
Unless you have had some experience with trading stocks on a leveraged basis (or trading futures), trading forex can be very stressful in the beginning. This is because forex pricing is “marked to market” all the time. In other words, your profit (or loss) is being constantly re-evaluated, right before your eyes, every second you are in a trade. In addition, many forex accounts allow for high leverage levels – far higher than can be found in traditional stock or futures accounts. Watching an investment whip around, at the rate of a leverage ratio of 100:1 or more, can be stressful. If you’re a newbie to forex, start trading with a leverage ratio of 30:1 or less. There’s less drama involved.
Trading Foreign Exchange With Your Head Not Your Heart
Emotions have no place in trading. Trading forex is all about prices and how to make a profit, if you discover that they’re mismatched. If you’re a beginner, practise trading on a “demo account” first, before you “go live”. Your aim is to make a consistent profit (before you start risking your own money). That means making money on 6 out of 10 trades – something you can’t do if your heart is in control of your head. Banks are the main participants in forex. They have highly experience dealers spread all over the world. Such people are deadly serious about keeping their jobs (i. e., making a profit). Before you start to trade against them, you had better be, too.
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