Forexunderstanding

This article is all about FOREX trading to make you rich – and were going to give some alternatives to conventional investment wisdom. Why? – Because most traders in FOREX follow the norm and make average gains – while this article is about making spectacular gains from FOREX Trading and making money fast!

The Aim

Here we are going to assume you know how to trade, and you have a methodology for FOREX trading you are happy with, and can apply with discipline.

What we are going to show you here, is how to change your system from making average gains, to making spectacular gains, with simple changes in trade selection, money management, and mindset.

FOREX trading offers the opportunity to make money fast – so lets see how it can be done.

1. Accept Volatility and Risk Cheerfully

All good FOREX trading systems incorporate volatility.

You can’t have a profitable FOREX trading method without taking calculated risks, and taking losses – if you cant accept risk, then dont trade.

Many traders back away from a market because its too risky – however, risk also means reward! If you are a trader who doesnt like volatility, then go and find something else to do.

Drawdowns are part of trading; its volatile markets that make FOREX trading fun and highly profitable.

To the well-informed FOREX trader, a drawdown is not something to fear, but something to enjoy.

Remember: volatility = big opportunity!

2. Trade Infrequently

Many traders trade frequently and always like to be in the market. They think that in FOREX trading if they are not in the market, they will miss a move, or that by trading more frequently, they will make money – wrong!

The big moves in FOREX trading, with the best risk to reward, come a few times a year, and you should trade infrequently.

Focus on the trades that make the really big gains

3. Dont Diversify

Diversification is an accepted wisdom, believed by most investors in Forex trading, but it wont make you money fast, – it will do the exact opposite.

4. Money Management

So far, you may think that we are being a little rash, but this is not the case.

We are focusing on the BIG opportunities that allow us to make meaningful gains, and this is actually, where money management becomes so important.

If you are taking risk, you need to control it – risk as much as 10% per trade, but increase your chances of success by:

1. Buying options at or in the money, to give you staying power – and prevent yourself from getting stopped out.

Many traders lose, not because they were wrong in market direction – they just were stopped out by a volatile counter move – and options will give you staying power.

2. Many traders start trailing their stops to close, they then get stopped out but the trade runs on to make spectacular gains. Dont fall into this trap – keep your stop in its original position – until the move is well in profit, before moving it up.

Youre looking to make money fast, and youre trading selectively – so have the guts to go for a trade when it looks good – and milk it for all its worth.

5. Understand the Power of Compound Growth

IN FOREX trading the way to make money fast, is to understand the power of compound growth. For example, if you target 50% a year in your trading, you can grow an initial 20,000 account, to over a million pounds, in under 10 years.

The presented article covers one of the most important (in authors opinion) aspects of trading in general and FOREX trading in particular managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with FOREX, and also to experienced traders who trade regularly and regularly make or loose their money to the market.

When I started to trade FOREX and made my first big losses and profits I began to notice when very important thing about the whole trading process. While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the green profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can. There are many known guidelines and ways to enter a right position at a right time like major economic news releases, global world events, technical indicators combinations, etc. But while the entering into a position is optional and trade can decide to miss as many goodbad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits traders ability to trade.

Choosing the good exit points for positions could be an easy task if only the FOREX market wasnt so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.

Lets say, you took a short position on EURUSD at 1.2563, at the time you are taking this position the supportresistance level is 1.25001.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position. This means that you must close it before its term is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position). After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the lossprofit limit as time goes by. Usually if I take a middle term position (2-4 days) I try to lower the stop and target order by 10-25 pips every day. I also monitor global events, trying to lower my stop-losses when very important news can hurt my position. If the profit is already quite high, I try to move my stop-loss the entry point, making a sure-win position. The main idea here is to find an equilibrium point between greed and caution. But as your position gets older the profit should be more limited and losses cut. Also, trader should always remember that if the market began to act unexpectedly, they need to be even more cautious with exit order, even if the position is still showing profits.

Every trader has their own trading strategy and habits. I hope this article will make its readers think about such an important aspect of trading as the exit orders and this will only improve their trading results.