So you want to trade forex markets and youâ€™re wondering how to get a trading plan together to make money?
Well here we are going to look at the basics that any forex trader needs to consider and pitfalls to avoid to get on the road to longer term profits.
You know the advantages of currency trading, but knowing these wonâ€™t make you any money. You need a trading plan that will help you turn these advantages into profit.
Forex trading is one of the few ventures where you can turn small stakes into large profits quickly. Most traders however lose and the reason is they donâ€™t study forex trading basics and the plan they need to succeed.
1. A method
Of course, you need a method you can use and this method needs to simple.
Simple methods are easy to understand and are more robust in the face of brutal market conditions.
If you donâ€™t understand why your system will not make money then you will never have confidence in it and you need this to have the discipline to follow it through losing periods.
Keeping your method simple will help you maintain your discipline which is vital to forex success
Basics of a method
Forget short or intra day trading, these methods donâ€™t work.
Itâ€™s the equivalent of flipping a coin. To make money you need to lock into the longer term trends that make the big profits.
2. Work smart not hard
The amount of effort you put in to forex trading has no correlation to your profitability.
After you have learned a method you need under an hour a day to trade and thatâ€™s it.
You method should be based on support resistance and a few confirmation indicators â€“ the best methodology to follow is a breakout method.
The logic is easy to understand, apply and most of the worldâ€™s top traders use this way of trading, so you should to.
3. Money management
You need to play great offense to make profits, but you also need to play great defense to stay in the game during losing periods.
There is a balance here between risk and reward.
You have to take a risk but itâ€™s a calculated risk when the odds are in your favor.
Some traders place stops so close their bound to be stopped out, others are more realistic and understand you need to take a reasonable risk to get a reward.
If you donâ€™t like risk donâ€™t trade forex.
The way to long term profits
Forex trading is a great opportunity and if you get a simple:
A robust long term trend following method you can apply with discipline and confidence.
You can then seek long term profits with a long term based trend following method.
These are the forex basics of success, obviously you need to apply the above in practice and we will cover more forex basics in further articles in this series.
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