Over 90% of Forex traders fail and many very quickly give up, not wanting to know why they failed at first.
The reasons for the failure of majority in Forex trading are-
1. Poor Skills
2. Lack of adequate capital
3. Setting unrealistic targets and goals
4. Lack of Patience
5. Lack of discipline
6. Greed.
7. No money management.
8. Lack of commitment to your trading plan.
If you check the reasons above, it becomes clear that the failure is as a result of trading without having in place a proper Trading Plan, One that includes good trading system, sound Forex education and training of the mind to be able to remove your emotion from the trade and sound money management rules.
What is a Trading plan?
Your trading plan is your map to success. It will always remind you of how you will trade and make money. Your trading plan consists of the following.
1. Trading system: this is the main part of your trading plan
2. Trading schedule: with this you determine when to watch the market, when to analyze and plan your trade. Never trade before news comes out for a season.
3. Your mindset: this is the most difficult part of it, try to remove your emotions from your trade.
4. Goals: always set achievable goals. Don’t set goal that are not realistic such starting a trade with $100 and making $10,000 in five weeks.
5. Your trading journal: This will be a valuable tool to helping you become a better trader. Make sure you log all your trades and why you took them. Later down the road you can look back and evaluate your trades and see how you are progressing. I’ve looked back at my trade journal and have seen just how much I’ve grown as a trader.
What is a trading system?
A trading system is simply a group of specific rules that determine entry and exit points for your trade [Forex signals]. These points, known as Forex signals are generated by indicators, are often marked on a chart.
Some of these indicators are moving averages, Stochastic, Oscillators, Relative Strength e.t.c
How can newbie’s succeed in Forex trading?
1. Adequate trading knowledge and understanding. You should seek services of good quality mentors. These set of people have developed different Forex strategies with which to be profitable in the Forex market.
2. Adequate capitalisation – Don’t be fooled that you can earn thousands every week from a starting capital of $500, I will advise you to start with a minimum of $1000 in a micro account, so as to prevent losing your capital in a whipsaw.
3. Unachievable Goals – don’t expect 100% profit each month, it is simply not possible.
4. Have patience – don’t trade if you don’t have to. You should wait for a set-up according to Your trading plan and system. Forex trading is a skill that takes time to learn.
5. Have Discipline to follow your rules
6. Have Understanding on risk management.
7. Overcome Fear.
8. Commitment to your Forex trading system and plan, so many people have used different Forex trading systems and still fail in Forex trading this is due to fact that they do not commit themselves to one particular trading system.
And lastly the most important is
9. Having a Trading System and a Trading Plan.
Money management
Money management is essential due to it helps prevent one from losing all his or her capital in a trade, In fact it has stood out to be one of factor that separates a successful Forex trading from a losing one. Create fixed rules how much money you want to risk per trade and stick to your rules. Don’t use a risk from more than 3%-5% per trade! Always Remember to cut losses and let profit run this is what will make you highly profitable but don’t be greedy always follow you trading plan to achieve this.
HOW TO KNOW YOUR TREND
Apart from money management always make sure you trade along with the trend, you cannot go against the market. Your question will be how you know the trend? its simple, if you trade on a particular time frame you will have confirm the trend by looking at two time frames higher than the previous time frame for example when you trade in 5 minutes chart you confirm using a 30 minutes and 4 hour time frame.
When you’re trying to decide how much time in between charts, just make
sure there is enough difference for the smaller time frame to move back and
Forth without every move reflecting in the larger time frame. If the
Timeframes are too close, you won’t be able to tell the difference which
Would be pretty useless.
1 minute, 5 minute, and 30 minute
• 5 minute, 30 minute, and 4 hour
• 15 minute, 1 hour, and 4 hour
• 1 hour, 4 hour, and daily
• 4 hour, daily, and weekly and so on.
Another effective way to know your trend is with the use of an indicator know as ‘ATR STOP’’, whenever other indicators show a different move from the ATR STOP know that it is a retracement, this indicator has been proven to be the best so far, so whatever trading system you use always make sure you use the ATR STOP to filter retracement.
NOTE: whenever the trend that start in a London session is not reversed in a new York session then know that it will continue till the next London session notwithstanding the Australia and Tokyo session that will come by.
WHEN TO TRADE TO BE HIGHLY PROFITABLE.
Forex trading is a 24 hours market apart from Saturday when there is no market, the market closes Friday night to open on Sunday starting with the Australian market, the best seasons to trade comprises of the London and new York season, trades can be extremely profitable in these seasons. Before looking at the best times to trade, we must look at what a 24hr. day in the Forex world looks like. The Forex market can be broken up into three major trading sessions: the Tokyo Session, the London Session, and the U.S. Session, you will be wondering why I did not mention the Australia season, the earlier seasons I mentioned tend to be more profitable. Below is a table of the open and close times for both London and New York session
Time Zone New York GMT
London Open 3:00 am 8:00
London Close 12:00 pm 17:00
New York Open 8:00 am 13:00
New York Close 5:00 pm 22:00
The eight most frequently traded currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD and AUD) are called the major currencies.
Best times to trade:
• When London and new York sessions are overlapping: 3-4am EST and 8am-12pm EST
• The London session is the busiest out of the other one.
Worst times to trade:
• Sundays
• Holidays
• News Events
How to identify the type of Forex trader you are:
Well, one of the first questions to ask is, how much time do I have to trade currencies and how long can I comfortably be in a position? Another thing is the amount of capital you have in your account and this helps you to choose time frame that you will use to trade. We can identify different trading personalities by timeframes.
• Scalpers – Scalpers are very short-term forex traders, usually in and out of trades within seconds. Most Forex broker discourage this type of trading. It’s also extremely dangerous due the high number of lots required to make a decent profit off a couple pips. Not for the faint of heart or shallow pockets.
• Day traders – Day traders open and close positions in the same trading session .
• Swing or intraday traders – Swing trading holds trades for days.
• Long term or position traders – Long term position traders hold trades from weeks to months at a time.
Next question to ask is, “how do I want to analyze the market and decide on which trades to take?”
• Technical Analysis – using charts and technical indicators to analyze the past price movements of a currency pair to possibly see where the price may go in the future.
• Fundamental Analysis – Watching and analyzing economic news reports and indicators such as GDP, CPI, Employment data, or any political news that may affect a country’s economy and their currency, you can also get news on economy on finance on www.yahoo.com and www.forexfactory.com, also with the help of Forex meter we can easy know about the economy of a nation and its effects on the currencies just by looking at the Forex meter.
• Most people also analyse the market as both technical and fundamental analyst.
IN CONCLUSION
If you want to be successful in Forex trading then you must do the following:
• Obtain a good trading system; remember there is no Holy Grail or perfect trading system, just follow the rules, acquire enough skills, use them and you will be successful.
• Apply your money management rules.
• Be patient to wait for a good trade.
• Always follow the trend.
• Demo trade for months before going real.
• Never enter a trade in the middle of an existing trend.
• Be disciplined and
• Remove your emotions from the trade.
I will like to introduce you to the trading system I use, it is very effective and simple to use. Profx trading system, beside been effective and easy to use, it is more accurate that many top trading systems ever used, generating lots of pips on a weekly basis not withstand economic melt down.
For more information on the trading system you can send me mail on romeonate@yahoo.com or post your comment here, you can equally subscribe to my feeds to keep you posted.
Always keep in touch on http://onnetbiztips.blogspot.com for more essential articles on Forex trading that can improve your trading skill tremendously.
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