The Forex Deal Butler

Archive for the ‘Forex Trading’ Category

Forex traders are always looking for the most profitable forex or FX trading system. The truth is that no system is perfect and that is why there are so many of them out there. In fact, there are probably as many forex systems as there are traders. Even traders who buy a system to follow from the get go usually modify it to suit their own trading plan.

Here are three things to look out for in an FX trading system.

1. Strategies That Suit Your Trading Style.

The best forex systems will have a selection of different strategies that you can use in different market conditions. For example, long and short term trading strategies, or one strategy for a choppy market and another for a stable market. You need to check that they all (or most) suit the way that you want to trade.

One criterion here is the time that you have for trading. A day trading system may depend on you being online at certain hours or for a certain length of time each day. It may not suit you if you have a full time job. You would want instead a longer term trading strategy that you can set and forget.

2. High Rate Of Successful Trades.

The main reason why you want a high success rate (or rather, a low number of losing trades) is psychological. Some systems have a lower success rate but maintain profitability by winning a lot when they win or not losing so much when they lose. This is OK in theory, but in practice it can be very discouraging. You will frequently have 3 or 4 losses in a row, sometimes even more, or a period when you seem to be dropping more than you gain for quite some time. This can lead to losing faith in the system, which in turn leads to erratic trading, bad decisions and, of course, more losses. A high success rate can protect you from this and help you maintain the psychological edge that you need to be a successful forex trader.

3. Effective Training.

Most FX trading systems that are sold online come with training but this can vary in quality. You need to make sure that the training offered is step by step. Video is often the best way and this becoming more and more common. You can watch and see exactly what you need to do.

However, ideally you should also have the steps written down in an ebook. That way you can quickly refer back later when you need a reminder of something, without having to watch a whole video again.

If you pick out a good system according to these rules you will have no trouble trusting it. As we said earlier, having faith in your system will make it much easier for you to stick to it through thick and thin, giving you the best chance of making money with your FX trading system.

There is a lot of money to be made in foreign exchange trading. Here are currency trading tips to help you maximize your profits.

1. Use weekly charts as well as daily charts

Checking back over the week’s price movements for your chosen currency pair will give you a better perspective on both short and long term trends in the market. It is easy to become blinkered in spot forex trading especially if your method concentrates on day trading. Weekly charts allow you to take a step back.

Sometimes the new perspective that you gain in this way will help you see what went right or wrong with your trading and why. This can help you to refine your systems to make them more profitable. However, do not make changes in a good system every time something goes wrong. There is a need for balance here.

2. Do not trade too much

It is tempting to jump into the market and open a trade whenever you think you spot an opportunity, when really you should have held back. It is often true that the fewer trades you make, the more money you will make. This seems counterintuitive because we tend to think that we need to make a lot of trades to build up big profits. But opening a trade at the wrong moment leads to losses, so in fact the opposite is often true.

You need to be comfortable with risk in order to engage in forex trading. Most traders even enjoy the risk. So it can be difficult to hold back from something that looks like a big opportunity. Remember this is investment, not gambling. You must choose your trades carefully. Taking chances in the hope of making a big killing is likely to lead to your account balance taking a hammering.

If you have a profitable forex trading system that does not often offer the opportunity to trade so it is not making you much money, do not be tempted to widen the criteria so that it lets you trade more often. This will almost certainly turn your profitable system into an unprofitable one.

Instead there are two things you can do. First you can increase the amount of each trade. This increases your risk and is probably not a good idea unless you are very sure of your system. Second you can try to find a different system that is equally profitable that you can operate alongside the first. This is the better option for most people but make sure that you test your new system thoroughly before adopting it.

3. Set realistic targets

When you are thinking about how much money you hope to make with currency trading, it is important to be realistic and accept that sometimes you will lose. You should only be trading with money that you can afford to lose and do not expect to double your money over and over in a short time.

Unfortunately many advertisements lead you to have very high expectations. You may see an ad that suggests you can double your money in 7 days, for example. This does not mean you are certain to double your money, and it definitely does not mean that you can do it every 7 days with no setbacks. Doubling your money in a short time is possible but doing it over and over without losses is not realistic. Expect to take at least one step back for every two steps forward and have reasonable targets by comparing with what you might make if you invested in stocks or bonds.

Before starting forex trading for real, be sure you are armed with sound strategies that you have tested for yourself. Weigh up all of your options and remember that you are entering a risky business. Keep these currency trading tips in mind and give yourself the best chance of succeeding as a forex trader.