How can an investor set themselves up for success in the Forex, a market that is so big and so volatile? The Forex, which is also called the Foreign Exchange market, lets investors bet on how the exchange rates between different countries' currencies will change. You can't always accurately predict how the market will move, but many of the best investors say there are ways to improve your chances of predicting market changes and making money from them. Here are a few things you can do to improve your chances of doing well with Forex technical trading:
- Trade only at the end of the day
- Don't look at Forex reports
- Backtest, backtest, backtest!
- Avoid over-trading
All investors are tempted to think that they need to be "in the know" all the time or they risk being caught off guard. So, these hard-working investors might sit in front of a computer screen all day and watch for changes in their investments. For people in North America, the business day ends at 5 p.m. EST, which is 2 p.m. on the West coast. This is the best time to think about trading, and note that I said "think about."
At the end of the work day, you have two things going for you: First, there tends to be less traffic, so prices are less likely to change. Second, if you wait until the end of the business day, you can use information coming in from the East to help you make decisions.
Overtrading is a lot like going to a casino over and over and thinking your odds are getting better, when they are not. If you trade too much, you are more likely to get into a position too late and lose money or get out of a position too early and miss out on profits. Set up safeguards so you don't lose more than you can afford, and then leave them alone and take it easy.
When you read what someone else has to say about the future of the market, it will make you question your strategy. No one will always be right, and no one can know what will happen in the future, so reading those reports won't help you once you've bought a position. Instead, it will hurt you. If you want to read those reports, you should do so before you buy in. After that, you should just leave them alone.
Investors buy and sell positions based on how they think the market works and where they think a certain currency pair is going. You shouldn't change your stops if you're already in a trade, but you can keep putting your theory to the test by backtesting. On the Forex market, people make money by spotting trends, buying into them, and riding them for as long as possible. Backtesting helps investors improve their theories and spot trends more quickly so they can make money from them.
Even though the Forex market is the biggest and most volatile, it also has the most profit potential. The few tips above will help you do well in Forex trading and greatly increase your chances of doing so. Be sure to carefully look over them!
