How To Become A Successful Forex Trader

 

TheFOREX market are often unprepared for what lies ahead and, as such, end up undergoing the same life cycle: first they dive in head first - usually losing their first account - and then they either give up, or they take a step back and do a little more research and open aDEMO ACCOUNT to practice. Those who do this will often eventually open another live account, and experience a little more success - breaking even or turning a profit. To help avoid the losses from hastily diving intoFOREX TRADING, this article will introduce you to a framework for a medium-term forex trading system to get you started on the right foot, help you save money and ultimately become a profitable retail forex trader. (For background reading, check out Top 4 Things Successful Forex Traders Do.)

Tutorial: Introduction To The Forex Market

Why Medium Term?

So, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? To answer that question, let's take a look at the following comparison table:

Money Management and Risk

Money management is key to success in any marketplace but particularly for theFOREXmarket, which is one of the most volatile markets to trade. Many times fundamental factors can send currency rates swinging in one direction only to whipsaw into another in mere minutes. So, it is important to limit your downside by always utilizing stop-loss points and trading only when good opportunities arise. (To learn mroe, read Forex: Money Management Matters.)

Here are a few specific ways in which you can limit risk:

• Increase the number of indicators that you are using. This will result in a harsher filter through which your trades are screened. Note that this will result in fewer opportunities.
• Place stop-loss points at the closest resistance levels. Note that this may result in forfeited gains.
• Use trailing stop losses to lock in profits and limit losses when your trade turns favorable. Note, however, that this may also result in forfeited gains.

Conclusion

Anyone can make money in theFOREX market, but this requires patience and following awell-defined strategy. However, if you approach forex trading via a careful, medium-term strategy, you can avoid becoming a casualty of this market.

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