Your Forex Game – Profiled

Coming into the forex market for the very first time, you ought to know that there are three main factors that you’ll have to get a solid grasp of to become a successful forex trader. They are mindset, risk management and strategies. If you can set yourself up solidly with all three of these, it will go a long way towards making you a successful forex trader.

The most important thing that you’re going to have to have together when you’re entering this market is your mindset without a doubt. A lot of new traders will come into the market and obtain the mindset that they’re only there to make a great deal of money. What they need to realize is that if you’ve got the mindset of simply setting up trades that will be profitable, the money aspect of it’s going to take care of itself. Focus on setting up good trades, not of the quantity of money that you wish to make.

There’s also RBS, who emailed clients Wednesday to essentially say, Yikes, we’re going to go ahead and take a look at what our traders are doing in the minutes before rates are set. This particular rigging saga is not to be confused with another well-known scandal — so-called Liborgate —where traders manipulated the short-term interest rate benchmark. But it looks like this (fairly similar) one may be the next big Traders Doing Very Bad Things fracas to rock the financial world. …

No form of investment is a guaranteed money maker and Forex isn’t an exception. As a matter of fact, owing to the amount of leverage given to exporters and investors in the Forex market, greed can quickly take over and all commonsense is thrown out the window. Experienced investors and traders know that a portion of their trades, even up to half of their trades, won’t make money. The reason they’re successful is that they’ve got a sensible money management strategy so when they do lose it does not leave them broke.

In any Forex trading strategy, there’ll be a drawdown. The trouble is, we do not know when the drawdown will begin. If a Forex trading strategy proves it is 80% successful, that means around 20 out of every 100 trades won’t be successful. If those 20 trades happened all in a row (yes, it can happen!) Your account could be completely emptied if you are not using sensible money management and you would not be in a position to continue trading the strategy for the next 80 potentially profitable trades.

If you are thinking about going into Forex news trading but still not that knowledgeable about it, you’ve got to realize a set of things. Forex trading needs a strategy, one which demands discipline, hard work and also a game plan. You must know that trading is not as easy as one thinks. The reality is, you’ll have to accept thata learning curve is involved, and that you’ll have to undergo it for you to be able to achieve the results that you’re looking for.

Risk management is the next area that you’ll have to work on. This is basically setting the limits for how much of your forex account that you’re willing to risk at any particular moment. Most people will give the range somewhere between 2%-10 %, personally, I prefer to never have any more than 5% tied up in any one trade, but finally you’ll have to decide how aggressive you want to get with this. Please realize though that putting up too much will put you at risk of losing a large part of your bankroll on a single bad trade. Keeping your risk low will enable you to make a few mistakes and still be found in the game. In this game, survival and capital preservation takes precedence.

Finally, your forex strategy will need to be developed. You will develop your forex trading strategy based on how you perceive and analyse the data that you get about the forex market. There is no right or wrong strategy, you just need to set up one that will consistently produce a profit for you and that you’re comfortable using day in and day out.

FAQ’s: is forex trading a zero sum game?
is forex a zero sum game?

  • Forex, the speculative market acts the same as the futures market. Yes, it is true that you can actually aquire physical currency, but that’s not what you’re doing when you trade spot forex. Technically, spot forex trading operates the same as futures, though on a very short duration basis. If you buy USD/JPY you are technically making an agreement to exchange JPY for USD in two business day’s time at an agreed upon price. Of course you won’t actually do that, just like most futures traders will never take or make delivery on the positions they run. That’s where the rollover comes in to forex trading. Your broker essentially offsets your open position, closing it out, and enters a new position – all done at the current market rate. In some brokers this is very clearly done, especially when you’re talking about interbank trading. Most retail brokers don’t really work that way, though. Instead, when you buy USD/JPY you actually borrow JPY, convert it to USD and deposit the USD, with the guy on the other side of the trade doing the inverse. That’s where the interest rate differential comes in. Again, you have a situation where any gain you make is a loss for the other guy, and vice versa because you both have a requirement to repay the respective loans you have taken out. It’s not as if you could actually take the USD you bought and walk away. One way or another, there is always someone with an opposite position to you matching your trade. If your broker cannot directly offset your position against another internal account, it will do so in the market. That is why forex is a zero sum game, like futures.

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