Trading Forex is a great way to secure earnings; in fact, many good traders boast six figure profits from successful trading. Nevertheless, the general community of amateur traders complains of not being able to make profits, nor even sustain their equities. So, what makes the difference? There are a few key elements which serve as unwritten principles and determine your trade outcome. If we ignore the positive aspects of Forex and pay more attention to the prevention of downfalls, there would be less room for disappointments; after all, controlling the risk factors of failure only helps to boost success.
Money management plays a crucial role in trading Forex. Like all forms of investments, trading Forex is a risky business and the money dedicated to the same should not be in any way related to your loans, mortgage or living expenses. The volume of trades and the number of lots that you decide to trade should never compromise more than 15 % of your overall equity. This simply means that you should understand your trading leverage, the volume of currency that you wish to risk and also the number of lots you would trade per session. The use of your “stop loss” is of utmost importance since it helps you to manage your equity. An open trade without a “stop loss” is as good as driving with your eyes closed: you may get away once, but failure is lurking at the next corner!
Discipline is another parameter of importance. This is an area of concern for most traders, since anyone can easily get carried away with the thought of “quick money”. Before opening your trade platform, ensure that you plan your trade session. This would help you to make the requisite decisions when needed. The signs of a lack of discipline include shifting “stop loss” against the trend, remaining glued to the platform all day and executing trades without thinking. The market is always present with opportunities for all, but your equity does not magically show up after it has been consumed by a margin call.
The last pillar of Forex is education. Learning the basics about trading is acceptable; however, if you are really serious about Forex you would want to take your knowledge to the next level. Keeping up to date with events in the Forex calendar, learning about technical and fundamental analysis and mastering the use of the indicators on the Forex platform are all vital assets for success in the Forex market. Bearing these three pillars in mind, you’re off to a good start!