Spot Forex

3 Currency Trading Tips To Help You Make Money

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.

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Wednesday, November 24th, 2010 Introduction, Strategy No Comments

Why Start Trading Currencies?

Trading currencies has been attracting more and more retail investors in recent times. Foreign exchange or forex is an OTC (over the counter) market where anybody can get involved. All you need is an internet connection, a good system or the time to learn and develop your own system, and some money to invest.

You do not necessarily need very much money. Brokers now offer mini forex trading accounts and even micro forex trading accounts which you can open with just a couple hundred dollars. However, it is better to have a little more, even if you do not put it all into the account in the beginning. Forex trading is risky and if you only have a couple hundred dollars to spare, you probably should be doing something safer with it.

But assuming that you have the funds and you have decided that you want to make money with some kind of financial trading, let’s look at why this could be a better option for you than stock or commodity trading methods.

1. No commissions and no fees.

If you have experience of the stock market you know how your profits can be eaten away by brokerage, exchange and even government fees. The free world nature of the forex market means that you do not have to pay any of these. There are no middle men. Brokers make their money through the spread, which is the difference between the bid and ask prices of a currency.

2. No fixed lot size.

In commodity futures markets, the size of a lot or contract is set by the exchange and you cannot buy or sell less than one lot. But in spot forex trading you can theoretically set your own lot size. Brokers tend to use their own standard sizes but if you know that you will want to trade small amounts you can look for a broker who offers small or fractional lots.

3. It’s a 24 hour market, five days a week.

From the beginning to the end of the global business week, the forex market never sleeps. This is great for people who need to trade outside of normal business hours. You can go work for the boss from 9 to 5, come home and start trading currencies in the evenings. Or you can start whatever time you wake in the morning, even if it is 5 a.m.

4. High leverage.

Forex brokers will offer up to 200 times your margin deposit in leverage. This means that you have the chance to make a lot of money from only a small deposited fund. You only need $50 to control $10,000 dollars in a trade. Provided you have good risk management and always remember that high leverage also means high risk, this can be a very attractive option.

5. A huge market with high liquidity.

The forex market is huge, so there is no chance of any single institution getting control of it. Even the banks, big as they are, have limited influence. Insider trading is not the issue that it can be in stock trading. And high liquidity means that you can always make the trade at the moment or the price that you want. You are never stuck unable to close a trade, and you can even set an automated trading system to close your position for you at a certain level of loss or profit.

6. Free tools and information.

Brokers are going all out to attract more retail traders and the competition between them is great for you as an investor. It is easy to find a good broker who will offer you a demo account where you can practice your trading, hone your skills and learn the basics before you start using real money. They will also give you the charts that you need to identify trends, and access to breaking forex news, all for free.

7. Low start up costs.

A computer with a high-speed Internet connection is all that is needed to begin trading currencies. If you want to use a robot for your trading you can find one for $100 to $200. A lot of information on trading currencies including advice on systems is available for free online.

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Thursday, June 18th, 2009 Introduction No Comments