By: Terry Allen
You know that you will have to learn many new ideas when you start Forex trading, but where do you start? Are there some concepts that you should initially focus on? This article outlines a number of ideas that will help you begin to think like a Forex expert.
You need to get a good handle about how you fit into the Forex market. This is not to depress you, but to ensure you make sensible decisions based on your Forex presence.
This market is massive in terms of the money transacted and the number of trading participants. The big players are represented by governments, large banks and investment companies, etc. You must adopt a conservative approach to begin with and not delude yourself that you can out-trade these professional bodies.
You need to analyze Forex effectively by studying trading charts and understanding the impact that fundamental events can have on currency pairs. You must not fall into the trap believing that the big traders know secrets that you do not. They have just mastered the use of their analytical tools over extended periods of time. You will have to do the same.
You must design techniques that will help you protect your equity as a matter of urgency because without money you cannot trade any longer. You can achieve this goal by learning the concepts of money management which will assist in preventing you from overtrading.
You must not concentrate on how much profit that you could potentially gain from your trades. Instead, you must deal with the downside risks first otherwise you will run the risk of exposing yourself to substantially losses should price suddenly turn against you.
In particular, you must ensure that your useable margin cannot collapse to zero which will result in your Forex broker issuing you with a margin call. Your useable margin is the amount of money that you have available to support your open positions.
If you overtrade and this parameter is reduced to nothing, then you will not be able to support your open positions any further and they will be automatically closed down. You must prevent this from occurring at all costs otherwise you will experience significant losses.
You must understand that your mindset is very important to you in achieving Forex success. This is because you will only gain consistent profits if you are capable of sustaining high levels of quality decision-making over significant periods of time.
You must also learn how to control your emotions and ensure that they do not interfere with your trading. You must develop a trading strategy and then use it in a professional manner.
You should prevent yourself from not studying Forex fully and in-depth because current developments do not concur with your own pre-conceived notions. Instead, you must realize that Forex is always right and capable of the most unpredictable actions. Consequently, you must open your mind and never trade with tunnel vision otherwise you will suffer financial losses.