How to Succeed in the Forex Market

how to succeed in the forex marketTrading forex is simple. You are simply speculating about the future exchange rates between two currencies, in what is known as a currency pair. For example, in the currency pair EUR/USD (euro versus dollar), if you think the euro will gain value against the dollar, you will buy the pair. If you think the euro will decline against the dollar, you will sell the pair.

When you decide to buy, you purchase a certain quantity of euros while simultaneously selling the same quantity of dollars. When you sell, the opposite takes place. There are only three potential outcomes, the euro can rise, it can decline, or it can remain unchanged. This limited number of outcomes is what makes forex trading simple.

Just because forex trading is simple, however, does not mean it is easy. Precisely when it will move up, down or sideways, and how fast and how far it will move can be challenging in the extreme. Predicting the future course of one currency against another and accurately timing when to enter or exit trades has made fools and poor men out of geniuses and the wealthy.

Being successful at forex trading is a matter of adhering to some basic common-sense trading rules. Depending on whom you consult, there are anywhere from a few to a multitude of these rules, but here are some with which to begin that will serve you well for as long as you decide to trade forex.

1. You already know how to trade.

You have known how to trade since you were very young. You know how to trade now that you are an adult. When you want to buy something, but you don’t need it immediately, and the price is high, you wait. When you want to sell something that has zero value to you, you sell it for whatever you can get. Currency trading is no different.

2. Let your winners run/cut your losers short.

All big winners start out as small winners. If you pounce on them as soon as they show a profit, you will have an impressive win/lose percentage, but very little profit to show for it. All big losers start out as small losers. If you fail to give yourself the right to be wrong, instead permitting a trade that has zero probability of ever benefiting you continue to rack up losses, one loser will wipe out all those little winners and a good portion or all of your trading capital.

If you can’t follow this rule, you will be your own worst enemy and your tenure in the forex market will be brief and unpleasant. It is a simple rule to state, but until you experience firsthand the adrenaline-charged state that trading can elicit, you cannot appreciate that it is not easy to follow this rule.

3. Do not take trading advice from anyone other than yourself.

It is tempting to believe there is some benevolent mentor waiting to divulge the secrets to fabulous wealth and luxurious lifestyles to you that are obtainable from forex trading.

In forex jargon, these mentors are known as “gurus.” They generally will make reasonably believable claims how they will, “for next to nothing compared to the rewards you will reap,” reveal the Holy Grail of trading. Don’t fall for this. You will be much better served by gaining your own experiences and developing your own trading strategies, even if you do have one or more losing trades in the process.

Contact Lucrorfx for any investment questions you might have.

 

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