Trading foreign exchange rates is essentially a simple process. The markets leave us plenty of clues as to their likely direction of travel. Good traders simply pick up on these clues by employing a finely tuned trading system that helps them open the right positions at the right times. In this article, we serve up some bite sized tips to help the new trader understand the most important basic concepts required for better foreign exchange rates trading.
5 Basic Foreign Exchange Rates Trading Concepts
1. Learn Simple Probabilities & Become A Good Trader. The moment that a new trader learns that successful foreign exchange trading is simply a case of identifying high probability trading scenarios, the faster they can make money consistently. There are certain market scenarios that play out over and over again within the foreign exchange rates world. Even as we speak, there will be currency pairs bouncing off price support levels and heading up – good traders are making money from this repeating pattern. Right now, another pair is breaking out of a range or trendline – astute traders are making money from this too. The more you learn about and experience high probability trading for yourself, the more money you’ll make as a trader.
2. Good Money Management Is Key In Surviving As A Currency Trader. Good money management is all about equity preservation. This may sound a little dull at first, but capital is the one thing every trader needs. Good money management may not actually MAKE you money but it will certainly help you lose a lot less while you’re gathering experience. And, the more market experience you are afforded, the more little tips you will pick up that will help you in becoming an incrementally better trader.
3. Learn From Your Own Experiences To Get On The Fast Track To Trading Success. Traders who can embrace and learn from their own mistakes and experiences tend to do far better, far quicker than those who don’t. How do you react when you close a losing trade? Do you shut down? Curse your luck and the markets? Or do you analyse the entire trading sequence from the analysis to the entry & exit points to find out what went wrong? There’s nothing quite as enlightening as learning from your own mistakes when trading foreign exchange rates.
4. Price Is The KING. there are hundreds of trading indicators out there, and many more trading systems that try to predict foreign exchange rates. They have their place for sure, but always remember that price action is THE leading indicator. Price is where the market is right now. No matter what your trading analysis or indicator combination spouts, you ignore current price action at your peril.
5. To Become A Successful Trader You Must Go With The Flow. Traders who make money seven, eight, nine times on ten understand the importance of trading along with the trend. Good trading isn’t about trying to get in early on a reversal – it’s about understanding where market sentiment is NOW, and trying to ride that sentiment as early as possible. When the market is rising, all you need to do is identify and act on the fact. When the market is falling, the same holds true. Do this religiously and it becomes more about HOW much money you’ll make rather than whether you’ll make any at all.
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