How A Forex Trading Strategy Can Help You To Be A Successful Trader
If you want to become a successful trader, there are a couple of things you will first have to do
. The very first should be to educate yourself about the forex market and how it operates. You can attend an offline course, or you can buy a good book or two about the subject. Alternatively there are many online courses and forums where you can pick up a lot of knowledge about technical indicators, fundamental indicators, designing a forex trading strategy and money management.
Secondly you have to teach yourself discipline. You need to have a written set of trading rules and you have to follow those rules like the Ten Commandments. That is to help you not to get emotional about any trade. Emotions such as fear and greed can ruin any trader. You need to keep a clear head at all times and there's nothing like a set of trading rules to help you do that.
Thirdly you need to decide on a trading strategy that works for you. There are thousands of different trading strategies based on a multitude of combinations of indicators, but they all have the same final goal: To minimize risk and maximize potential profits. Trading strategies can be modified over time, but NEVER while you are inside a trade - then you have to stick to your own rules and to your trading strategy.
One of the least complicated trading strategies is to use the simple moving average or SMA. A very common strategy in this regard is to buy a currency when the price moves above the fourteen period moving average and sell it as soon as the price moves below the average again.
Another strategy is not just to exit the trade when the currency starts trading at a lower price than the moving average, but to actually enter into a reverse trade, in other words you go into a short position. This results that you will always be in the market - either in a long trade or a short trade. This has both advantages and disadvantages; The most notable advantage being that you will never lose out on an opportunity and the biggest disadvantage being high trading costs.
The SMA is an example of a very simple trading strategy. It works quite well for entering the market, but not always so well when you want to exit again. By the time the price is back at the moving average level, it might already be too late to make a large profit. That's why many traders combine the moving average with another technical indicator, such as the MACD, which might pick up a falling market sooner than the moving average.
Which particular forex trading strategy you follow is not really that important. What is important is that you have one and that you follow it. Otherwise you will be at the mercy of emotions and rumors to make trading decisions.
by: Julie Jones.
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