In anything that you set out to achieve in your life, there is no one formula for gaining success. Although many “gurus” may tell you otherwise, other learned friends in the stock and forex markets will inform you that the only things that pay off are hard work and diligence. Financial markets and trading are largely dependent on what traders do in them, succeed or fail, and if you know some of the techniques that seasoned players use, you may follow suit and apply these success factors to your own trades in the forex markets.
Why do you think that many traders tend to stick to equity and avoid forex online trading? The answer is simple: they may think of the world of forex as a river flooded with alligators just waiting to take a bite (essentially a bite out of traders’ funds). The attitude to trading within the forex markets is one of fear as there is plain currency involved and such markets are believed to be risky due to their perceived volatility. This is no reason to steer away. With sound analysis and an efficient implementation of strategies, you can achieve a good success rate in the forex markets. Of course, talent matters, but if you work hard, that talent may just see the light of day. There are strategies and plans that help you in trading overall, but the factors mentioned can be approached with a view to forex trading.
1. The Right Approach to Forex Online Trading
As you are trading with plain currency, exchanging one currency for another, you do not need to open a demat account to trade in the forex markets. You simply have to have a trading account and this must be linked to a bank account. Before you start your trading activity, you have to, as with any other activity in the markets, prepare. Prepare how? It is vital that you align your unique financial goals and your distinctive temperament to market instruments that are relatable. For instance, if you understand one currency pair better than another in terms of what influences shifts in value and the like, you should go ahead and trade with that pair. This is akin to any retail trader who understands equity better than futures and options - they would do better in equity markets.
Forex trading online has low commissions and fees, and this draws many investors to the trading floor. However considering you need smart ways to find your way around the forex markets, your approach is one success factor but needs the following considerations:
- The Frame of Time - The frame of time that you wish to succeed in has a lot to do with your frame of mind. If you trade off a 5-minute chart, you may be more suited to holding a position with no exposure to risk overnight. In contrast, if you pick weekly charts, this indicates your comfort with overnight risks, and may see a few days go in opposition to your position. If you want to make a significant gain, you require patience. However, short-term winnings and losses can both be small, and you will have to trade frequently.
- Your Method - Whatever method you pick has a lot to do with your approach. Methods involve consistency to work. Choose a system and stick to it, depending on your individual style. For example, some forex traders purchase support and indulge in selling resistance. Others like to buy and sell breakouts. Still more traders will use indicators. If you find a method that gives you returns, stick to that.
- Instruments and Systems - In your trading career, you are bound to discover that some instruments work well compared to others. Testing instruments on your trading system will give you a winning recipe in your trading approach. For instance, in forex online trading, if you are choosing to trade with the USD/JPY pair of currencies, you may find that the Fibonacci resistance and support levels serve your purpose better as they are reliable for this currency pair.
2. A Great Success Factor - The Right Attitude
Your attitude is everything while trading in any markets, and this is a part of what forms your trading behaviour. The mindset you have, going into forex trading online, should have the following attributes:
- Patience - Patience is the key once you are aware of expectations from your trading system. You must be able to wait for price levels to reach certain points according to planning done with your strategy. In case, the price is not reached, move on to another trade. However, this should not be done in a fleeting moment of impulsivity.
- Discipline - Discipline and patience are linked. You have to have faith in your system and stick with it. If your system demands that you take some action, you should do so without hesitation. This is especially so for a stop-loss position.
- Objective Approach - There is no room for feelings or your “gut” taking over in the forex markets. Remember to be objective.
3. Motivational Factors
In forex online trading, it is important to know how instruments trade with differing degrees of variations dependent on major investors and their motivation. These intentions of large players influence market movements in not just currency markets, but most others too.
4. Implementation of Strategies
No trading system is a surefire 100 percent profitable. You may have taken great pains to establish a strategy, but this may not be a sure thing. Nonetheless, if you have a strategy that works about 65% in the direction of profit, you may have a near-winning plan. The whole idea behind successful implementation of a strategy is how you execute trades. Ultimately, it all boils down to controlling your risk. You can make some adjustments to your plan if you need to.
Be Realistic and Forge Ahead
You may try to manage and execute your trades keeping all the success factors in mind, but may still lose out a few times. This should not discourage you in trading. In fact, no one who starts out with currencies can win in the first few trades. It takes time and patience to make gains in any market. However, forex markets are a good way to diversify your portfolio across geographical regions. For trading in stocks you may have to open a demat account, but you don’t for currency, so you have less to do to start. True portfolio diversification comes with having a mixed bag of investments in your kitty and you may consider investing in an upcoming IPO with this in mind.
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