What is forex trading and how does it work

Foreign exchange trading used to be the process of buying new currency when traveling to another country. The exchange rate would be used to change your home currency for exotic coin. 

The foreign exchange trading  (FOREX trading) involves similar process. It is however done electronically from users device (computer, mobile phone tablet). This type of trading often involves use of leverage to speculate on fluctuating value of one currency compared to another one. This is done both for fun and profit on the biggest market that ever existed - FOREX. 

 

Forex trading for beginners 
About 98 percent of Forex trading beginners will fail miserably within first 3 months of trying. The obvious reasons are gambling instead of trading, lack of dicipline, greed and fundamentally bad trading system. 

 

Forex market is also one of the toughest market that ever existed for beginner to get in. The fact that new traders can use leverage doesn't really help.

 

The leverage allows controlling more equity on the market with same deposit. For example trader using 100:1 leverage can open trading position at 100 000 USD while having only 1000 USD deposited (excluding margin requirements).

 

This means that the slightest move against his position, will wipe his account clean. This also means that the account could be easily doubled (as optimistic beginner will say).

 

As a aspiring trader you should know, that luck should never be a factor for your trading. Instead you should be also able to withstand whole bad months of consecutive losses (consistent bad luck). Leverage should be used very carefully. Trader should generally trade least available position size for his balance. 

 

So the smart trader with only 1000 USD on his account should never trade with more than 0,01 lot (1000 USD) per position. If his strategy allows, only then he can open more, up to 0,05 lot. It is true than less is more in forex trading. Smart trader would also never risk more than 1 - 3 percent of his account per position.


Finding a forex strategy

Find a forex strategy (set of trading rules) that suits you and follow it. It is not about sheer number of trades until you become successful forex trader. It is about number of perfectly executed disciplined trades. Master you forex strategy and continue your education about forex market. If you can't trade manually Expert advisor can be used to follow your strategy rules with typically better performance than any human can achieve. If you use expert advisor, your job is not to tamper with its setting and do not increase the leverage when you feel like it. Make sure you know ins and outs of your trading system before you ever launch it live. 

 

Avoid mistakes in forex trading

The principles for success in forex trading are very easy to write yet incredibly hard to follow when you play with money. Yet you must master yourself before, you master the market. Take care of the downside and the upside will take care of itself.

  • Do not gamble. Trade your strategy, based on market data and backtest history. Know your expectations and don't take trades outside your system rules (unless you are very experienced). 

  • Don't get greedy. Greed kills more traders than any other aspect of human psyche. Why would you trade with 0,01 lot when you can use 0,1 lot and make ten times more ? The next thing you know your account is gone. 

  • Don't overexpose yourself. Trade with less than you can afford to lose. Let your trading become little boring. When you are not caring too much, you will be able to make better decisions in the long run. 

  • Stick to the system. Once you have good forex strategy never switch in on the run. Any change should be based on hard market data and proper backtesting. The process should take weeks. When its done on moments notice, it can never be god. 

  • Do not count on luck. Luck will never happen in forex. Never count on luck to help you, quite the opposite expect to get unlucky and be prepared for it. 
     

Please reload

ABOUT US

THEFOREXKINGS

“Trading FOREX since 2006. Full time trader and web developer since 2013. My two biggest hobbies are trading and web development. In TheForexKings I managed to connect both of them. Even after 12 years of trading I still have the same passion for the market as at the beginning. The aspect I enjoy the most : development and testing of new ideas.” 

 

Only in 2016 - 2017 we have created more than 400 forex strategies. During this period we have also developed and published +200 MT4 Expert advisors based on those strategies. We are dedicated to provide you with viable and complete trading systems that have thrived in extensive historical testing. We want to give you complete and transparent trading solutions, that once mastered ,will set you financially free. We want to give you a fighting and winning chance in the market. ” 

—  Marian, Proprietor of TheForexkings.com