How to Successfully Trade in the FOREX Market
There is no way to avoid risk when trading the forex market. Success requires a complete understanding of forex trading practices and instruments, a trading strategy that consistently yields profitable market entry and exit signals and the discipline to let winning trades run while quickly cutting losses. Traders sometimes use automated forex robots to execute trading strategies efficiently and without the emotional baggage that can sap a human's discipline.
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Instructions
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Choose a forex online broker. The best type of forex broker is one that does not trade against its customers. This type is called a non-dealing desk (NDD) broker, and unlike a market-maker broker, has no vested interest in your failure. The preferred type of NDD broker is one that utilizes an electronic communications network (ECN) that provides real-time access to all participants in the forex interbank market. Only ECN brokers provide a depth of market window displaying all pending trades awaiting execution -- an important informational benefit that helps traders pinpoint entry and exit prices for their trades.
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Develop a trading strategy. The purposes of a trading strategy are threefold: to monitor real-time prices and volumes of trading, updating technical indicators as new information arrives; to signal the best opportunities to enter and exit the market, usually based upon reaching a pre-determined price level; and to quickly execute trades when entry/exit signals are generated. Trading strategies typically use different technical indicators and tools, such as charts and moving averages.
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Automate your trading strategy. A forex robot is computer software that automates the generation of trading signals and execution of trades. There are many robots from which to choose, so you will need to research the different offerings to find one with the features you require. A robot enforces trading decisions to establish and terminate forex positions with the cold discipline of a computer program, freeing you from the anguish brought on by greed and fear -- emotions that can destroy the most meticulous trading strategy.
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Tips & Warnings
Remember you are competing in the largest zero-sum game in the world -- almost $4 trillion changes hands daily in the forex market. You can only make money if someone else loses. Therefore, you are well advised to master the forex knowledge base and to then choose an area of specialization, such as trading only a certain pair of currencies or using an esoteric trading strategy. Whether or not you use a forex robot, you should thoroughly back-test your trading strategy before investing any money in the market.
Do not use dealing desk brokers -- they make money when you lose yours, and dozens have been cited by the Commodity Futures Trading Commission for violations such as price manipulation. Also, avoid high margin ratios. In the U.S., brokers offer up to 50:1 margin ratios -- they finance $50 to every $1 you provide -- which can lead to quick margin calls when the market turns against you. A margin call is a request by the broker for more collateral or else the broker will sell your position and lock in your loss. Stay away from margin buying until you have established a successful trading regime.
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