What are the basic trading strategies
Forex Trading is thebiggest market in the world in terms of activity. A mammoth $5 Trillion istraded each day. With the amount of volume traded comes great opportunity.
Traditionally it wasonly the wealthy who had access to trading high volumes on an exchange but now,thanks to leveraged trading, virtually anyone can compete and trade in theForex market.
There is a wealth ofonline brokers which facilitate trading with leverage, granting accessibilityto traders with less capital who want to trade higher volumes.
New Broker EagleFX allowsusers to start trading with as little as $10 and lot sizes starting from 0.01lots up to 1,000 lots - catering for beginners and professionals alike, inpristine trading conditions.
It is important toconsider some key fundamentals before entering the market with a 'buy' or'sell' position.
This article will runthrough some of the key 'do's' and 'don'ts' which will help you, as a trader,be more successful by following a few simple rules.
Do's
Have a trading plan!
It is massivelyimportant to have a game plan and hence why it makes it to the top of the listfor this piece. Not only is this true in sport but is especially true in Forex.Traders need some sort of clear goal and objective when entering a market.Forex trading is considered an aggressive marketplace so having a plan ispivotal to success.
Without a plan,trading might as well be considered gambling.
Do your own research
Knowledge is power somake sure you are doing some reading of current market trends and politicalsituations that might affect a particular countries currency.
Politics is a goodplace to start when looking at how a currency may fluctuate as well as otherfactors such as war and natural disasters. In August 2005, Hurricane Katrinadevastated New Orleans costing the US economy an estimated $45.15 Billion.
Epidemics can havedamaging effects not only on the populous but also on markets. The ongoingCoronavirus has hammered markets in recent days and weeks. Global Stock Marketshave been gripped by fear and UK Stock Markets are seeing their biggest fallsince the great financial collapse of 2008.
In addition to theFootsie having its worst day in 12 years, the DOW had 2,000 points wiped off asmany economists are concerned over a looming global recession.
Be patient!
Patience is a virtueand a vital ingredient when looking towards trading successfully. Being patienthelps to keep any impulsive behavior patterns at bay.
Goals
Set yourself a targetof how much you are willing to lose. Not only this, set yourself a targetprofit you would be happy with.
Trading Platformssuch as MT4 have tools where you can set a desired 'take profit' and a'stop-loss' where you will be stopped out of a trade when the profit or lossamount is triggered. This is especially useful in long term positions and ifyou are unable to log into your trading account.
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So now we have seen the 'do's' let's explore the 'do nots'!
Don'ts
Don't overcomplicate strategy
We know that having astrategy is crucial to trading success. Having a clear outlay of objectiveshelps maintain discipline but try and keep things simple. Having too much tothink about may serve to cloud judgment.
Don't let your emotions take over.
Human beings areextremely emotional and even more so when under stress. Stress can be magnifiedwhen money is involved!
What is vital intrading is to not let emotions cloud judgment when in an open position.
The big 2 emotionstraders will experience at some point or other are:
- GREED
- FEAR
Greed, one of the 7 deadly sinsand a particularly dangerous attribute to have when trading. Greed makes humansbehave differently and without clarity. It is a feeling of want rather than need.
Greed can affecttraders in several ways. Greed can make traders 'overtrade'. Overtrading in thesense of chasing losses or having multiple positions open to try and offset alosing trade.
Traders can and willtake unnecessary risks if greed starts to seep into the trading psyche. This iswhy having a strategy is essential and - sticking to that strategy even moreso. Traders should have a particular profit in mind pre-execution. Maintainingdiscipline and taking that profit is the challenge to most.
Fear can leave traders feelinglike deer in the headlights and debilitate us - resulting in a fight or flightscenario.
When a trade startsto creep into profit, fear can make traders close positions too early in fearthat the price will begin to fall when in fact the market is moving on up.
Equally, fear canmake traders close positions too late when a target profit has already passedand the market starts to shift against us.
New traders areparticularly susceptible to FOMO - fear of missing out. Traders open positions without thought oranalysis, fearing that a chance might go when in reality, it wasn't there inthe first place.
Don't fall into the trap of revenge trading
Once you have reachedyour target profit, take it. Make use of 'take profit' features to alleviatetemptation.
Don't use money you can not afford to lose!
This goes withoutsaying, only invest capital which you can afford to lose!
Trading should betaken seriously. With the right blend of analysis and research, trading Forexcan be a profitable side earner.
Don't turn tradinginto gambling and stay within budget parameters.
Take advantage of arange of analysis pages at Award Winning ECN Broker, EagleFX. Traders can make use ofdaily market analysis features including charts which can be edited as well as economiccalendars highlighting global events and press releases which will affectglobal market performance.
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Thisarticle was submitted by EagleFX.
