by Harry Skillings
There is no magic formula that guarantees profit on any type of investment. The forex market is no exception to this, but there are some steps you can take when devising your personal investing plan that will not only make profit more likely, but will protect you somewhat from disaster.
* Learn to Use Technical Analysis: The forex market lends itself very well to statistical analysis. Trend following is an example of a type of analysis that can guide the investor in making profitable decisions. Technical analysis of the market includes monitoring price movement as well as numerous other indicators. There are programs available where this amount of data can be crunched in any way that fits your own plan and your own needs. You are going to need to find the correct way to access and organize the data needed for the execution of your own investing strategy.
* Select Your Term: There are three basic time frames within the forex market dealing with the length of time a position in a certain currency is held. They are short term, medium term, and long term. Each has its pros and cons. The short term position holder, sometimes known as a scalper, will be making rapid fire trades often exchanging currencies back and forth within a single day. The long term trader will hold on to his currency for months or even years. The medium term trader usually holds his positions for a few days or a week. The advantage of the medium term is that it requires the least amount of capital to realize profit. Leverage is only needed to increase that profit, whereas in both long and short term trading, it is necessary to both protect the investment, and insure any chance of profit. Although medium term is recommended for the beginning investor, and iis less risky, you need to identify which is right for your personal plan, and stick to it. A plan that tries to use all three at once will most likely lead to confusion.
* Learn to Perfectly Time Your Trade: One of the features of the forex market is the ability of the investor to iprotect himself from drastic market swings. This is particulary important in today's environment. With the exception of weekends, there is a forex market operating somewhere day and night. A good trading plan should include both "stop loss" and "take profit" orders. These are basic instructions to change your currency position when either your profit or your loss reaches a certain point. The stop loss order is more easily understood. This is simply getting out before things get too bad. The take profit approach usually meets with more resistance, and it is true such an order might prevent you from making more profit should a volatile change keep moving the value upward. Volatile is volatile, however, and what goes up fast may come down faster. As you can not monitor your account twenty four hours a day, you want to know that if your profit point is obtained while you are sleeping, at least your expected level of profit will be realized.
One of the biggest advantages of the internet age regarding forex trading is that you can freely use demo accounts - these are basically virtual forex games. These programs give you a chance to invest virtual money and see if you are successfull. Once your trading plan is decised, execute it using a demo account. By doing this you will get a chance to see how it works, fix any bugs, and fine tune your entries and exits, before you risk any real money.
* Learn to Use Technical Analysis: The forex market lends itself very well to statistical analysis. Trend following is an example of a type of analysis that can guide the investor in making profitable decisions. Technical analysis of the market includes monitoring price movement as well as numerous other indicators. There are programs available where this amount of data can be crunched in any way that fits your own plan and your own needs. You are going to need to find the correct way to access and organize the data needed for the execution of your own investing strategy.
* Select Your Term: There are three basic time frames within the forex market dealing with the length of time a position in a certain currency is held. They are short term, medium term, and long term. Each has its pros and cons. The short term position holder, sometimes known as a scalper, will be making rapid fire trades often exchanging currencies back and forth within a single day. The long term trader will hold on to his currency for months or even years. The medium term trader usually holds his positions for a few days or a week. The advantage of the medium term is that it requires the least amount of capital to realize profit. Leverage is only needed to increase that profit, whereas in both long and short term trading, it is necessary to both protect the investment, and insure any chance of profit. Although medium term is recommended for the beginning investor, and iis less risky, you need to identify which is right for your personal plan, and stick to it. A plan that tries to use all three at once will most likely lead to confusion.
* Learn to Perfectly Time Your Trade: One of the features of the forex market is the ability of the investor to iprotect himself from drastic market swings. This is particulary important in today's environment. With the exception of weekends, there is a forex market operating somewhere day and night. A good trading plan should include both "stop loss" and "take profit" orders. These are basic instructions to change your currency position when either your profit or your loss reaches a certain point. The stop loss order is more easily understood. This is simply getting out before things get too bad. The take profit approach usually meets with more resistance, and it is true such an order might prevent you from making more profit should a volatile change keep moving the value upward. Volatile is volatile, however, and what goes up fast may come down faster. As you can not monitor your account twenty four hours a day, you want to know that if your profit point is obtained while you are sleeping, at least your expected level of profit will be realized.
One of the biggest advantages of the internet age regarding forex trading is that you can freely use demo accounts - these are basically virtual forex games. These programs give you a chance to invest virtual money and see if you are successfull. Once your trading plan is decised, execute it using a demo account. By doing this you will get a chance to see how it works, fix any bugs, and fine tune your entries and exits, before you risk any real money.
About the Author
To learn an amazing breakthrough system that can skyrocket your trading profits, go to the Best Forex Trading site or go to http://www.ForexSuccessToday.com
Harry Skillings writes from Massachussets
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