As a newcomer to forex, there is a right way and a wrong way to trade. Many people begin in this amazing market thinking they can dive right into it with little to no experience and receive substantial returns. The truth is, it is possible to receive consistent returns if done correctly and if having received the proper education, system and money management.
The first ingredient to becoming a successful forex trader is understanding yourself and your habits. How much risk can you tolerate? Do you make hasty decisions or sound ones? The biggest question we have to ask ourselves is how do you handle your emotions after a losing trade? Can you continue working your system and stick to a set of rules? These components will all play a key role in your success as a forex trader.
Fortunately enough for us, there are trading systems out there that do work and attempt to eliminate the emotional side of trading. Many systems contain a complete set of rules and guidelines to follow telling you when to enter and exit a trade. What one has to realize is that systems do work, it's when we as traders fail to follow the system as it was designed run into trouble.
Many forex systems yield spectacular results when back tested over a period of time and if your not sure what that is, it's when we take historical data and apply that data to the system to see what would of happened. The proof is there, however the challenge becomes fighting off the human element and refraining from taking trades outside a set of rules.
In becoming an successful forex trader and doing it the right way, it's first important to identify a profitable system and apply proper money management strategies. One money management strategy I recommend is a risk to reward ration of 4:1 Meaning we only have to be right 1 time out of 4 to at least break even. Another words, even if we lose 70% of our trades, we are still profitable because we are making four times the amount we lost on each trade. Another rule to follow is never risk more than 2% of your capital on each trade. Even if you had 15 losses in a row, it's only a 30% loss and you can continue trading knowing your system will eventually pull ahead in the long run.
These are just some common mistake both new and experienced traders make. However with patience, and discipline a trading system can go a very long way and potentially yield substantial profits.
Tim Rohrer is an established writer and currency trader. For more information on profitable forex systems, visit forex trading for profit. |
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