The world has always been full of get rich quick schemes – failsafe strategies by which you can turn $100 into $100,000 with minimal effort. Since the advent of the internet age, their number has multiplied, but here is a funny thing: We have also become wiser, savvier and perhaps a little more cynical.
So how about Forex? Look on one website and you will be told that by trading Forex you really can make these sorts of gains. Look on another, and it will say that if you are a novice, Forex trading is a better way to turn $100,000 into $100 than vice versa.
So who is right? The answer is a somewhat unsatisfying “everyone and no-one.” What it comes down to is that the Forex market is a place where those who know what they are doing and follow some basic rules can make good money. Not necessarily on the $100 to $100,000 scale, but good, nonetheless. It is also a place where fools seem particularly keen to rush in and will pour money into the market with very little knowledge or strategy behind their actions.
Forex traders have been making money on the markets for thousands of years. You can most certainly do the same, but only if you invest the time and effort into understanding what you are doing, learning the markets and approaching every trade with a professional attitude. Anyone who tries to tell you otherwise is simply selling you snake oil.
So now we have that clear, what are the tips you need to follow in order to take on the forex market and come out on top?
Get to know the market
Congratulations, you’ve read through the financial pages and sat watching BNN on cable for an hour or so. You are now armed with the knowledge that the US dollar is up against the Japanese yen and the Euro is holding steady against sterling. Ready to start trading? Absolutely not.
The Forex market is not as complex as it might have seemed 30 years ago, but it still takes time to really understand, and failing to invest that time and effort is where so many people go wrong. There are plenty of courses available, some won’t even cost you anything except your time. If you are serious about making a success in trading, put in the hours to learn about Bollinger bands, the DeMarker Indicator and the various other tools and forex indicators.
Follow a set strategy
To succeed in anything, you need a plan of action, or a roadmap that will get you from point A today to point B in the future. When you understand the market, the next step is to draw up your strategy. For many new investors, that is the easy part – the difficulty is in sticking to it. By all means, refine it along the way as you learn more, but the worst thing you can do is dive in, find that a trade does not go the way you expected and then throw everything you have learned aside as you adopt new, high risk approaches to try and make up lost ground.
Roll with the punches
The above scenario, where your first trade does not work out the way you hoped, is not uncommon. Ask the most experienced trader in the world, and he or she will tell you it happens all the time, and it is just part of Forex trading. Rolling with the punches means being ready for the fact that any single trade is liable to go wrong.
That’s fine, as long as you have not staked your entire trading budget on it going right. A good rule of thumb is to limit your exposure on any one trade to two percent of your overall account. That way, you are protected from disaster and when things don’t turn out right, you can learn from the experience and move on to the next trade.
Watch the prices
What is the main indicator that dictates your actions in the Forex market? If you have followed the first piece of advice, you will know all about the DeMarker Indicator, MACDs and RSIs. But think a moment – none of those existed hundreds of years ago, and back then traders made money by keeping a close eye on the price action.
Those additional tools are great for giving your trading that edge, but don’t ignore the biggest indicator of them all. Always track the price.
Keep it business-like
Some talk about Forex trading as if it is a game – like sitting at a casino putting it all on black 22. This is a dangerous approach, as we have already established that while you cannot predict every contingency, there are enough indicators out there to make the forex markets far more than a game of chance.
Keep your approach professional, and if you find yourself getting angry, frustrated and tempted to do something foolish, think what you would do if you were sitting in front of your screen on the verge of sending a rude or abusive email to a business associate or client. Step away from the laptop, take a walk and only return to it when your head is back in control of your heart.