Taking into account that 95% of Forex traders lose money, you should think twice what will let you win. Below there’s a checklist for you to evaluate your chances of success on the market. You can find out whether you’ll be able to become one of the elite traders, making outstanding long term profits. The options below are a few ways to lose your money. If you want to try any of them, you are better to change your mind immediately and give up the idea of trading:
- Day trading and scalping. This one simply doesn’t work because of the random short term volatility. Just as the robots, even people selling these demonstrate simulated track records.
- Using a Forex robot with simulated gains. This tool will promise you achieving success without any effort You will be asked to accept the tool’s track records simulated going backwards. However, your equity will be destroyed by trying to do so.
There are more of similar tools, all falling into the category of looking for someone else to ensure you success. Such approach doesn’t work in Forex markets.
Apart from the necessity to have a trading edge, the trader should also understand the ways and reasons leading to success. Below there are a few of them:
- Success comes from within. You have to understand what you are doing in order to trade with discipline. This means having confidence, which you definitely won’t get if someone else tells you what to do. You can only get confidence from your own knowledge and education
- Discipline and losses. Since you have to continue executing trading signals within losing periods, discipline can be hard. You have to continue this till you hit a home run, even if you are losing money.
- A trading edge. This is what separates out your trading system from those 95% losers You have to be able to answer what exactly your trading edge is and how it can help you win You don’t have a training edge if you don’t understand what it is. Indeed, only few can succeed in Forex trading. The options below are present in the winners’ trading strategy:
- Using simple robust Forex system
- Having education in the basics of currency exchange trading
- Understanding exactly why the system will lead you to success
- Being confident and disciplined to stick with the plan
- Realizing that only you are responsible for your success on the market
In other words, you should stand alone, have confidence in your actions and be disciplined enough to follow your plan in the trading.
- Success is in your hands. Although this may sound simple, it is in fact depends on your own approach to trading. You should have the right mindset and get right education. You should rather beat yourself than allow the market to beat you in Forex trade All you have to do is learn the fundamentals of Forex, get a suitable system, gain confidence, get an edge, remain disciplined and enjoy currency trading success!
The best thing about trading on the international market of currency exchange is that you are able to trade with leverage. This means that you can borrow as much as 1,000 times your capital to make a deal Nevertheless, borrowing money for trading on Forex is similar to borrowing money for any other purpose –you will have to pay interest on the loan. Since Forex trading involves both buying and selling, the interest on your loan may be offset by the interest made on the currency you purchase Let’s find out what are interest rates in general, to understand how the Forex market is affected by them.
Central banks set interest rates in accordance with their national monetary policy – high interest rates would make the national currency more expensive to purchase, while lower interest rates make it less so. If you imagine the government of a country having high inflation, it would help you realize how interest rates are used.
The government, witnessing the rapidly rising prices, may take a decision to raise interest rates, which is supposed to increase the cost of the national currency, and make demand and consumption drop, because borrowing would become more expensive.
In return, this would cause prices to fall, while inflation rates would decrease In the same manner, if a country undergoes recession, it may lower interest rates in order to boost the national economy, because lower price of currency would cause demand and supply to increase.
The interest rates set by central banks define at what rate commercial banks can borrow money from the governments and lend them to their customers. This includes Forex traders, and that’s where interest rates start affecting the trade.
If you, for instance, want to purchase EUR/USD, you will need to borrow the dollars in order to buy the Euros and therefore pay interest on the dollars and earn it on the Euros If the interest rate set for Euro is higher than that for the American Dollar, you will earn more on the Euros you bought than you pay on the dollars you borrowed This means a profit for you.
But unless there is a considerable difference between the interest rates, the net profit or loss would be marginal. In addition, while interest rates are set on an annual basis, trading positions are normally opened for short periods to considerably lower any gain or loss on interest rates.
As for the trading tolls, we can say for sure that there is no single super smart instrument that can give you a fortune in a matter of minutes. The best solution here is to use a combination of different instruments in order to find the favorable market forces allowing to get a maximum number of high probability trades within a specified period of time. One of the most popular market trading tools is called Trendlines, and many experts gave their testimonial for it.
Trendlines are a very effective instrument for trend identification. It represents a straight line connecting two or more price points and then extending it into the future for you to follow You will see the lines drawn across considerable lows in an uptrend, along with considerable highs in a downtrend. In order to classify trendlines, experts divide them into three types:
- Short Term
These lines are drawn across the latest two lows in case of an uptrend or across the latest two highs in case of a downtrend. The best observations can be found on a smaller time frame like 15 minute or 30 minute chart.
- Medium Term
These lines are observed on a bigger time frame, such as a 60 minute chart. It will connect the nearest considerable low to current price action to the previous considerable low in case of an uptrend In the same manner, it will connect the nearest considerable high to current price action to the previous considerable high in case of a downtrend.
- Long Term
This one will use larger time frames, such as 4 hour chart or even the daily chart to draw long term trendlines in the same manner as with Medium Term lines. These lines are regarded as an effective market trading instrument The daily chart is usually used by traders of big companies who don’t normally engage in small moves on an intra day level.
When you draw a trendline on a daily chart, you are then able to graphically analyze where the price currently is and where it’s likely to bounce. However, the traders should employ trendlines as a market trading tool with caution and discretion. If you cover your charts with every possible trendline, it will lead to confusion and blurry analysis.
It is also not a great idea to rely solely on a short time trendlines, because they can merely give you a defined picture of current price action, which are often broken during the day. In fact, their main use is to provide you with a clear, easily recognizable graphical representation of current price behavior.
In case you notice that the price is coming back to test a trendline on the bigger time frames, you should look at other factors. You can try drawing in horizontal lines to see key support and resistance through previous highs and lows. You can also draw Fibonacci retracement and extension levels, find out the daily pivot points and locate them on the chart as well