Category: Currency Trading
As far as the market size is concerned, without any doubt, the Forex market is the biggest market around the world. It boasts an average turnover of over $4 trillion per day. With the passage of time, this big but decentralized market became extremely popular. Primarily, this happened because of a number of innovations in the world of technology over the past few decades. Today, with the help of technology, millions of traders can enter the Foreign exchange market. If you are new to this market, given below are 5 facts that can give you a deeper insight into this business world.
1. Small gains add up
Although Forex is one of the top markets in the word, most traders don’t make huge profits in the beginning. At first, they analyze the market and do a few trades with small amounts of money earning small gains. With the passage of time, the small gains add up. This type of traders has a great deal of trading experience.
Actually, your goal should be to use the right strategy in order to keep earning without suffering from huge losses.
2. The Selection of a reputable broker is important
For an ROI, the Forex market offers an endless pool of opportunities. But it’s really important that you sign the contract with a good reputable broker. By good, we mean a broker who is regulated and licensed. Proper research is required to make sure you hire a broker who is professional and established. They should offer different types of services including good customer support.
3. Emotions are not important
By nature, trading is an emotional undertaking as your hard earned money is at stake on the market that is volatile and unpredictable. But if you enter the market with an emotional mindset, you will be more likely to suffer from failures. Actually, when you are emotional, you tend to make rash decisions.
If you don’t want this to happen, you may want to put together a trading strategy based on a trial trading account, which is known as demo account. In fact, learning to trade objectively is only possible if you set your emotions aside when trading. This will raise your odds of making a return on investment on a regular basis.
4. Insider trading is a false belief
Unlike what most people may have told you, there is no truth in insider trading in the Forex trading market. So, it’s important that you keep in mind that you will have to make your decisions on the basis of the current conditions of the market and the most recent news. In other words, there is no magical way or short cuts to make profits.
5. Simple Strategy Works better
Lastly, if you are looking for a solid approach to gain success in this trading world, you should use a simple strategy instead of a complicated one. In other words, you should opt for a simple but tested strategy on the basis of a deep market analysis. You can apply this strategy throughout your trading career.
Understanding the tiny facts about the Forex market is mostly what it takes to be a successful trader. Many people from a standoff-ish point of view see Forex trading as so much hard work meant only for professionals with long years of experience in the finance industry – but there is more to it. What many do not know is that just about anyone can make a huge fortune from the Forex market with the right idea and the right practice.
It is true that there is need for hard work and experience, but that is just the secondary aspect of what one needs to succeed as a Forex trader. People readily skip the primary facts that form the foundation of a successful trader, thinking they are negligible when they are not. A stable psychological state of mind is one of the primary factors that have so far proven immensely important in trading successfully. The weird thing about it is that anyone, new or seasoned professional traders, can fall prey of the damage that comes from not having a sound mind towards trading Forex. It takes constant efforts, irrespective of past records, to keep one’s head above water in the world of currency exchange.
TAKE A LOOK AT THE FOLLOWING SCENARIO
Mr. A is experienced in the finance industry as a professional analyst and trader. He has worked with so many finance organizations, learnt a lot in the process, and even developed some awesome theories that earned him a noble price. Obviously, he is highly sought after at all times, and there is a long waiting list of huge finance firms asking for his consultation and partnership. Mr. A finally agrees to work with one of the big companies as the team leader of a group of exceptional high end professionals like himself, and the whole world’s eyes were on them to see how they will fare. Definitely, Mr. A and his team are expected to change the story of the organization for good; everyone expected that. The question now is how good will the outcome be? You can imagine the surprise when Mr. A and his team lead the company to its demise. Yes, the company closed down as a result of wrong calculations amplified by leverage.
What went wrong with Mr. A and his team? The only logical explanation to that is that they were too proud of their achievements, and as such were psychologically damaged to the point that they thought they knew it all. They felt they could control the Forex market since they are an excellent group of analysts working together, probably the best group of analysts in the whole wide world. That right there is psychological instability, and it does not go well with Forex trading.
HOW TO MASTER THE PSYCHOLOGICAL ASPECT OF Forex TRADING
Meanwhile, this story is real. It happened to LTCM funding company, and there is so much the finance world can learn from that when it comes to mastering of emotions while trading the Forex market. Here are some points to help:
1. ALWAYS WORK WITH MODERATION:
Do not put all of your eggs in one basket; never. There will always be better opportunities in future, so it makes no sense to feel like “it is now or never”. Greed is at the top of the list of the problems encountered by Forex traders. It is important to always seek profit and attach importance to financial success, but it should not be the driving force of the traders.
To make sure greed does not prevail, ensure strict adherence to discipline. Traders should always learn to stick to their trading strategies at all times. Every anticipated move should be based on principles established by the diligent study of the market.
2. WHAT IS THE WORSE THAT CAN HAPPEN?
In the career life of every Forex trader comes a time of indecision. No one can control the Forex market, and that is more than enough reason for many to fear. There are times a trader may be on a failing streak, and it looks like the strategy is not what it should be. Well, it is the Forex market; no one has control over it. The best any trader can do is to stick to the plan, and keep a bit of an open mind towards the opinion of others based on proper research. Indecision should be highly avoided, even at the point of fear.
To avoid the implications of trading fears, traders should learn to stick to the strategy of course, and avoid random decisions. Also, traders should avoid leveraging their accounts unreasonably, thereby risking too much. Always have it in mind to stake just as much as you are willing to lose.
3. DON’T GET HIGH:
The thing about getting high is that your state of mind is elevated in an unrealistic manner. A trader that gets high on Forex trading is tempted to believe that Forex will give him unlimited wealth no matter the approach he takes. Even traders that may not have ever experienced failure in trades should not get high or euphoric on that. In most cases, people that are in a euphoric state of mind while trading Forex end up frustrated because they allowed their feelings of might to blind their reasoning. If you have been on a winning streak for a while, be careful not to think that you have mastered Forex trading so much that you can trade without your strategy and still get good results. Anyone that dares to do that is simply high; and is doomed to fail at a point.
Always have it in mind that all strategies have flaws, no matter how long it has worked perfectly well in trades. The market changes, therefore strategies need to be altered to suit the change as required. A trade can only be successful if the trader has put in time to study the market and applied profitable principles of trading, not the other way round. The case of LTCM is a very good instance of this case.
4. IT GETS BETTER:
Again, a trade can only be successful if the trader put in time to study the market and applied profitable principles of trading. It is possible to lose several trade one after the other; it happens even to the best of Forex traders, which can lead to panic. However, this is not enough reason to quit as many may be tempted to, rather, the trader should put in the required time to study the market and apply the right principles.
Note that periods of market volatility causes panic more than any other factor. Volatility can make a sound strategy seem like it is useless, which is true. Strategies for trading a volatile market environment are not exactly the same with non volatile market conditions. Some traders prefer to use a different strategy entirely, or stay away from trading the Forex market in such times.