Forex Trading Profit

A Big Stack of Forext Trading Profit

Currency, Currencies of the world—Images of Money (Flickr.com)

The foreign currency exchange market, or “forex,” is the largest market in the world. Currency traders strive to make money by selling currency for more money than they paid for it. The principle seems simple enough, but the reality is that making money on forex is not easy. It takes hard work and determination, along with an understanding of how the currency markets operate.

To successful make forex trading profit, you need a trading strategy and an overall trading plan. This means having an entry, exit, and catalyst (reason for taking the trade) in their mind before they invest a single penny. When you watch traders, sometimes they will hold on to their currency during a down period, losing some money but “weathering the storm.” Other times they will want to cut their losses. You may not be able to decipher why they do what they do, but the reason is actually simple. Professional traders became professionals by collecting a ton of data and being able to seperate it in to what works and what doesn’t. Once this crucial part is done, a trader does not care about any single forex trade. They always know what to do. Their focus is on their overall trading plan, not the individual trade they are in now.

Traders also need to be able to look at market trends for opportunities, and they must be able to identify risks. This can come with sound risk management skills and the mathematical skills to calculate the acceptable reward/risk ratio.

Trading experts are always saying that money management is one of the most important components of successful forex trading profit. Traders who have good money management skills do not make decisions based on a “hunch” or “gut feeling.” In addition, successful forex traders anticipate losses as well as profits. When it comes to currency trading, there is simply no substitute for good money management skills. This means never using too much of your trading capital at one time. Again, the professional trader looks at Forex profit and focuses on the 100s and 1000s of trades that make up the trading plan, not a single trade. A Professional with never bet the house on a single trade no matter how good or profitable it looks.

Another thing that successful forex traders have in common is psychological toughness. Since money is so volatile and conditions are changing all of the time, loss is inevitable sometimes. Losing money causes stress for currency traders. Traders need to be tough enough to accept losses with composure: they need to be clear-headed at all times, able to analyze the situation and to learn from the experience. Forex traders who have what it takes in the psychological toughness area never seek “revenge” for money lost. They just move on to the next trade. If trading properly, they will not be invested enough in any trade to become psychologically distraught. Think about it like this. If you have $100 and you risk $100, you are more likely to pull you money from the market if you get scared. If you have $10,000 and are risking $100. The amount is only 1% instead of 100%. Who cares if you lose it? As long as you analysis is profitable over 100 trades, you’re not going to lose money overall.

Although some traders advocate “not caring” about the money at risk being the most effective way to make forex trading profit, others feel that if you don’t care, you may be enticed into a mistake due to boredom. Here the psychology is simple. Nosce te ipsum (Temet Nosce) meaning “Know thyself”

Part of being psychologically strong is having good discipline. Discipline is another characteristic that experts say directly contributes to traders’ success in the forex market. Traders with good discipline have a self-imposed “stop” and a “limit.” They do not go over this stop based upon a feeling. Traders who trade intuitively are the exception, but generally you either trade analytically or intuitively, not both.

Traders who understand the secrets to making forex trading profit are also able to analyze, understand and interpret forex news. There are several websites that can help with this—ultimately, though, the best forex news site will not be able to compensate for a trader who does not know how to use the information. Even so, these websites are valuable resources for forex traders, beginners and veterans alike. If you are into high frequency trading, you know that the most important thing is how the market reacts to the news, not whether the news is good or bad.
Newcomers to forex are often looking for a single strategy that will net great profits. This strategy simply does not exist (although most profitable strategies are “simple”). Instead of realizing great profit, many times beginners lose money as a result of bad decision-making.

Millions of dollars are lost in this manner. It is best to be realistic and smart about how much money you will make, or to put it another way, how much you will lose. Indeed, the most successful forex traders are happy with small “wins” and accepting of small “losses.” This is the attitude that new forex traders must adopt in order to thrive and become profitable. However, this doesn’t mean you shouldn’t take big winners, it just means that a large number of small wins is often a more “balanced” way to trade.

Those seeking forex trading profit will also need brokers, even if they are engaged in high frequency trading from their home. Most beginners have no idea where to start when looking for a broker. Asking fellow currency traders, friends and family may be a good way to begin. You can also see our article on High Frequency Trading Firms. Many forex firms offer traders a wealth of useful information, including real-time quotes, breaking news and charting. Many also feature chat rooms, where traders of all experience levels can gather to relate stories and learn from each other’s successes and mistakes.

There are many books, videos, courses and blogs on the web to help beginning forex traders to be successful. There are also many software packages available. While beginning forex traders need this information to be successful, all of the trading knowledge in the world will not be a substitute for clear-headed money management, sound decision making and psychological toughness. Once you have these, you will be on your way to discovering the secret of Forex trading profit.