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.

Comments on Forex Trading Account Sizes, Lots and Margin Calls.

Forex trading is one of the best business opportunities you can think of joining these days. No other market in the world allows the Leverage that the profitable world of currency-trading does. Leverage is all about margin trading. In the Forex market, it is essentially the ratio of the amount used in a trade to the required security deposit needed, by the particular broker you chose to use, for that trade.

Normally, for most brokerages, a margin deposit of just 1,000 allows you to control a 100,000 position in the Forex market. That’s 100:1 leverage, or 1%. Or, said in a different way, a regular full-sized account, sometimes referred to as a 100k account, allows you to trade with lot sizes equal to 100,000. Each lot is worth 100,000 in currency. So It would only require 1,000 to trade one lot.

This great feature in Forex trading is what makes this market the hottest market to trade in right now. The Forex broker has given you a loan of 99,000 pounds secured only by your 1,000! This is a huge loan and, as you may know by now, this is what allows traders to make extraordinary incomes in this market. And, as you also are probably used to hearing , “leverage is a two-edged sword” , it is what can cause you to lose a lot of money if you trade without rules or Stop-loss orders.

But just as an example, let’s say you were a person that likes to trade with reckless abandon, i.e., with no strategy, no common sense, no money- management principles, etc. Thats never recommended for anyone, but being a Forex trader has such great advantages, that even someone with a trading mind like the one described before, will never lose more than what he has placed into a trade.

Unlike Futures (Commodity Trading), the market that most people associate with High leverage, you can never have a debit balance when trading Forex.

So, despite the greater leverage associated with FX trading, it is still arguably less risky than futures trading. Futures markets are often prone to sudden and dramatic moves, against which you cant protect yourself, even by trading with protective stops. Your position may be liquidated at a loss, and youll be liable for any resulting deficit in the account. But because of the Forex markets great liquidity and 24-hour, continuous trading, dangerous trading gaps and limit moves are very unprobable. Orders are executed quickly, without slippage or partial fills, which is just great.

And as it was not enough, there are no margin calls, for your protection, the forex broker’s trading platform will automatically close out some or all of your open positions if your account equity, meaning the total floating value of the account, falls below the level required to hold the positions. Think of this as a final, automatic stop, always working on your behalf to prevent a debit balance.