Making money from trading "forex" trading requires skill, strategy, spare money and nerves of steel. Why? Because of the shear volatility in the market. Simply put, there are just too many unpredictable variables and any one of them could affect the position of a chosen trade. It is not all doom and gloom. Anyone can make money provided he/she uses his/her head and not their heart. In addition to that, they must follow and adhere to a some simple rules. An example of a simple rule which one particular trader followed was " I come into the market to make $500 per day. And, as soon as I have made my $500 my work for the day is done ". He goes home. Don't be greedy. Always, have a clear head.
Here are the tools and techniques to help you trade:-
1)Learn to read the charts and understand the implications of currency movements. Charts give you an invaluable insight into any given trade, its history and some indication of its future movement. For example, if the charts show an upward trend of 2% per day for the past 5 days. That is a good signal. (Sharescope for a fee will give you access to a tool and data which you can analyse and play with)
2)At what point should you take a position? Normal rule of thumb is when the trade has moved higher than the previous high. Or lower than the previous low. Fifty two week high is also good indicator for a position. Conversely, 52 week low is good indicator. How can I learn about charts? That is very simply. Read a book by Martin Pringle. Martin explains charting to you using videos so nothing is left to chance.
3)Taking a position means betting on the trade movement either up or down. If you take the view that the trade is going to go up then buy a 50 pence per point movement. What if the trade goes against me? Yes that is likely and can happen to anyone in the market. To prevent incurring big losses put a stop loss point some 10 or 15 points below the price of your trade. Say $/Euro is your trade; price of your trade is 1234 for the sake of illustration. Then your stop loss point will be 1219 meaning at point 1219 you will be taken out of the market and you will have lost £7.50 in total as opposed to unlimited loss. If, on the other hand, market follows your prediction and moves up 300 points; you will have made £150. You can bank that money by moving the stop loss point 15 points below the new position.
I am still very confused? Trading requires an understanding of the market, the charts and tools. Some tools are internet based so being familiar with the internet is a must. In order to really understanding trading, ones needs to go on a training course for weekend.
The other option is to learn by trial and error. All the spread betting companies offer you a free trading trial run with an imaginary account. What happens in practice is a make believe account with say $100,000 for you to play with? You go and try your luck until you have either made a decision to open a real account or you have spent all the money but did not make any progress. The other advantage of opening a real account is that you have access to a big learning resource consisting of audio and video presentations by experts of courses etc.
Finally, trading like a professional is not being glued to the screen but enjoying the experience. Therefore, the tips and words of wisdom from professionals are trade medium term trades as opposed to day trades. Last but not least, Market Wizard is a great book to read because all the traders: rich and poor, are interviewed for you to refer to and learn from. Good luck.
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