For many people, forex trading is a new way of making money. Some think that it is too hard to make money there. Others think that it is a full scam. There is also a group of people who think that trading is a peace of cake so they put their hard earned money on a trade and lose everything.
Actually, successful trading is a completely different kind of a process. It is not hard to make money by trading. Moreover, it is not a scam. Novice traders should understand that no one in the entire world don’t know what will happen next on the financial markets. Thereby, it is wrong to put all the money on a single trade. The result of this action would be the same as betting on Red or Black on the roulette wheel.
Look at trading as a process very similar to investing. The potential profits that could be made by trading and investing are pretty much the same. They are measured in percentage of the initial capital that a trader is capable to make during a year. Traders are short-term investors. The main difference lies in the increased number of trades that short-term traders open in relation to investors.
Trading is hard to call a business. It is more like investing. The amount of efforts put into trading won’t make a trader richer. What is more important is the amount of money a trader can put into trade to make more money. It is all about profits in percentages. Average traders can double the trading account once in a year. Rarely someone manages to make more than that. Thereby, if a trader has 10.000$ in the initial capital then his goal would be to make another 10.000$. Moreover, he should not even think of making 100.000$. It would only be possible if trading is done with inappropriate money management and a very high risk of losing everything. For example, a trader can make 100.000$ with risk 1:10 to lose all of his 10.000$. However, by trading the right way, without a risk of being burned, it is impossible to make 1000% during a year.
Of course, a trading strategy is also important. If a backtest of a strategy shows less than 100% in a year then it is necessary to keep looking for a better trading system. In fact, there are a plenty of different edges to choose from. Each strategy has its pros and cons and traders should choose which of them to use in their trading. It is very similar to choosing individual stocks into investors’ portfolio. Once a strategy is chosen, it is very important to follow it without any changes to it for a substantial amount of time. That is where trading becomes a boring process but eventually it brings very good profits.
Most excitements traders should feel while researching the market and not while trading it. Trading is just executing signals that have a positive chance of winning. The accuracy of these signals’ execution together with a proper money management is the key for successful trading.
Traders should avoid emotions while trading and keep trading even when strategy shows drawdowns. It is very important to stick to the chosen strategies. Every strategy has its good days and bad days. If a trader decides to change the strategy in a middle of a drawdown then most likely his new strategy won’t work while the old one could get out of scrapes.
To make money by trading forex it is essential to have a plan. First of all, traders should realize how much they can make and what drawdowns could happen to them while they trade. It is necessary to understand before beginning to trade on the forex market so that to avoid stressful situations together with complete frustration. Secondly, it is necessary to choose strategies. It can be just one or several strategies. In a case with multiple strategies, all of them should be traded separately in order to not get tangled with them. Finally, traders should have proper money management. Every trade can easily be lost. Thereby, traders should put 1% or even less of their trading capital into each trade. Higher risks are unacceptable and should be avoided.
In the end, forex trading isn’t that complicated. It is people who complicate it more than it really is. Actually, simple trading strategies perform very well and often even better than complex ones.
There is no need to be a trading guru to make money on forex. Trading is just following the rules that worked in past. That is why, everyone can benefit from trading forex. However, it is not a getting rich quick scheme.