Published On: Mon, Dec 3rd, 2012

Trading like a Forex Expert

You will gain many benefits in learning how to use a well-proven trading methodology. Essentially, you first need to enhance your skills so that you specifically concentrate on the risks involved when you open a new position as opposed to its potential profits. For instance, imagine that you have identified that the Euro is coming under stress after your fundamental analysis has indicated that some of the peripheral member countries of the Eurozone are experiencing substantial debt issues. In addition, you have detected that the EURUSD has fallen over the last few days.

If you now study EUSUSD trading charts using the daily time frame, you may still clearly detect that a strong bull channel is evident. In addition, you could also verify by utilizing a technical indicator that no new bear trend has yet been created despite the recent Euro weakness. In contrast, if you had analyzed the EURUSD trading chart by utilizing a 15-minute time frame, then you may have already gone short because a bearish crossover was flagging you to do so. As a result, you may have entered a trade possessing a considerable risk element because you would be trading against the long-term trend.

Novices waste excessive quantities of time and energy pursuing trades with little real profit potential but exhibiting high risk. For instance, they could open one hundred trades resulting in 70 wins but gaining an average profit of $5 while the 30 loses had an average loss of $20. This sequence of results generates an expectancy value of -$2.5 implying that they will lose -$2.5 for every $1 risked over the long haul. Such an outcome would be appalling and very demoralizing after so much hard work.

In contrast, Forex experts formulate their trading decisions by utilizing the superior statistics attributed to the longer time frames from the daily upwards. As such, they are prone to open much fewer positions but of higher quality. For example, over the same time period they may activate just 10 trades producing 8 wins with an average profit of $100 whilst their two losses produced an average loss of $50. As such, the expectancy value of their trading strategy would be equal to $70.

After many novices have traded Forex for any length of time, one point that they come to realize is that regardless of whether they are trading a strategy or a Forex robot, they will always have to assert some form of judgment themselves.  For instance, if they were using a trading strategy that is based on a technical indicator then they would have needed to interpret its readings in order to decide whether they should have opened and closed trading positions. In short, they make the ultimate choice.

Similarly, if you are trading a Forex robot then you will also have to make important decisions despite the substantial reduction in the levels of trading judgment required. For example, you will need to determine which combination of its settings will provide the optimum trading results and whether you will obtain improved profits using a virtual server or your own computer.

A level of trader judgement will be required no matter which method is used to trade Forex. Consequently, traders must always remain focused in order to achieve consistent success. One of the main reasons why so many traders struggle to create successful trading plans or execute trades profitably is their lack of focus.  You simply cannot allow yourself to procrastinate or become easily distracted by the next best indicator, program or enticing email that comes your way.  To overcome these types of problems, you need to attain an easy-to-understand methodology that will start you on the track to successful Forex trading.

Such a tool will inspire you to become the best trader that you possibly can. If you learn the concepts and techniques comprises such a methodology, then Forex trading could well provide you with an unlimited and exciting future!  Always remember that no matter which Forex strategy or method that you decide to use, you will always remain a central component. In other words, getting to know your own objectives, strengths and weaknesses as a Forex trader is one of the first steps to success.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.