If you’re swayed by promises of making large profits in no time by trading forex, then know this: it is entirely possible, but it is not luck or good instinct that makes you money. Buying shares to put away for your kids’ education is a decision that can be made with a lot of thought, and a good serving of faith in a well-run company.
In the fast world of forex trading the average trade lasts less than a second, thanks to computer trading software. If you want to learn to trade forex, strategies that are tried and tested are the only things that will give you any chance of making a profit.
Beware of Emotional Trading
As we’ve said before: if you want to learn to trade, forex strategies are essential for long term profits. Emotional trading is what makes people who use clever strategies the winners. Trading emotionally means making a trade you don’t have solid, analytical reasons to believe will make you money. It also means holding onto a trade that is in a losing position because you hope that you can recoup your investment. Clear strategies that you understand how to implement effectively are the only way you can
What You Need to Know to Use Forex Strategies
Before you can start implementing the first strategy a Google search turns up, you need to have a thorough understanding of what makes your market move up and down, and how you can spot when a breakout is imminent. Sticking some Bollinger bands around a price and clicking ‘buy’ when it goes over the resistance line is not a forex trading system strategy. Most of the times you try this, you will lose money.
An effective strategy is a set of rules you can apply to a currency that will give you clear buy or sell signals, and tell you when to close a trade. It will include stop loss and take profit limits, and will be based almost purely on proven technical analysis of that currency over a generous time period.
We say ‘almost purely’ because following a spreadsheet of numbers while oblivious to the outside world is almost purely stupid. It makes no sense to carry on following a strategy that takes advantage of small moves in a currency that result from investor fear and greed when you know that country is in the process of a overthrowing its government.
The bottom line is: if you can’t make up your own strategy, you shouldn’t be using anybody else’s!
You Get What You Pay For
As is the case with most things, forex strategies that actually work usually don’t come cheap. While searching online can turn up a few well-known trading strategies, these are better spoken of as ‘principles’ than strategies. They will guide you to finding a proper strategy, but in order to get a solid, reliable set of rules you can use effectively, you will probably need to pay someone who has done the very challenging work of creating one already.