There are always people asking me why there are so many people lose money in currency trading market, that is simply because he/she has not learn the correct way. Why there are people who traded foreign currency for years, but still losing money, that is because he/she has not learn the correct way.
Is it difficult to earn money in FOREX market? Even you have spent years and years in this? On the other hand, why the newly joined beginners can make profit in the initial stage? In fact, the winning strategies of trading can be learnt in just ONE WEEK, but provided the strategies must be correct and efficient.
What is the practical ways to have winning trades? You got to ask the traders who make tones of money in forex market, remember to only listen to those who are making money. I always believe that only winners are qualified to make the statements. Articles and forums with 99% fancy wordings are nonetheless useless to you, only 1% is useful, but do you think you are able to extract that 1% useful content? If you couldn’t, I would suggest you not to read at all. Profiting traders do not have time to comment, only those average “professionals” have it.
The problem is here, useful content is always limited, obstructed by a lot more useless articles. Then, what content is important to us? This is highly depending on your effort. We read only useful articles, and keep these good contents. There are many forums on Forex that share good articles, I highly appreciate because I have learned a lot from them.
- Follow the trend
This is the most direct way in market trading, i.e. follow the trend. The most appropriate way to handle the market trend is to follow it. This is the greatest treasure to earn money, be it sculpting or long-term investment.
A well-known investor in USA, said: “The most profiting and safest way to trade, is always follow the big trends. The biggest losses and stressful trade, is always when I hold trades that are going the opposite way”. For new traders to learn forex, you must understand and confirm the direction of price movement. This is very important in trading any instrument. Once the price direction is confirmed, set your lot size and hop into the market, follow the trend, sit back and wait for take-profit. Learn how to trade by following the trend, using appropriate risk management skills, then only you will have outstanding trading results.
Recommended indicator(s): Moving Average (MA). This is a very simple yet powerful tool to analyze the direction of price movement. Mix different time-frame parameters to get better results.
- Focus the big, let go the small
Fresh traders should build solid trading foundation to aim for long-term consistent overall profit, and not to focus only on individual losses. To achieve this, we must learn how to pick the correct ones in the market, focus on big opportunities, let go the small ones. So we need the following two measurements: risk-adjusted return ratio and success rate.
Success rate, is the rate of successful profit trades. Eg. In 10 trades, which profit trades are 5, so the success rate is 50%.
If our risk-adjusted return ratio is 100 pips : 300 pips, with success rate of 70%. This translate to in every 10 trades, average return is 300 pips, average loss is 100 pips, so the total average return would be (300 x 7) – (100 x 3) = 1,800 pips.
In contrast, if our risk-adjusted return ratio is 300 pips : 100 pips, with success rate of 90%. I.e. average loss of 300 pips and average profit of 100 pips in every 10 trades. So the total average return is (100 x 9) – (300 x 1) = 600 pips.
By considering these two measurements, we shall strive our best to get the lowest risk-adjusted return ratio and highest success rate.
- Stop-Loss
Set your stop-loss, save your capital. Before that you must have chosen right position(s) to grow your capital, this is the third secret of trading.
In trading, there is no crystal ball to predict 100% correct trades, all predictions are just possibilities. Therefore, to deal with uncertainties in market, we must take necessary procedures, i.e. set stop-loss order to control drawdown risk. Imagine that market risk is just like a crocodile in mud that biting your leg. If you do not cut your leg, then this crocodile will eventually eat your whole body. Risk is always inherited in trading, we cannot avoid it, but we can properly manage it. After setting stop-loss, traders will have a vivid, measurable, quantifiable loss limit. This is utmost important in upholding the confidence in you.
When you have stop-loss orders, you must also learn how to make long-term profit, as to cover the losses caused by mistakes. You have hold longer to make big money, you must make big money to cover the losses, you must cover losses then only you have net profit in the end.
Investors who do not set stop-loss orders will eventually face great losses; traders who only have stop-loss orders will certainly lose in the end too. Only traders who know to make money while having stop-loss orders to control will make the great success in the market.
To learn Forex, you must put your greatest effort into it. I would suggest that every night before you sleep, close your eyes and think the underlying principles of Forex market, analyze the market psychology, know the main stimulant of the market. To earn money in Forex market, it is advisable that you spend at least 2 hours of learning every day, while spend half day learning during weekends. We couldn’t say we need long hours to know how to earn money, but we need very long period to explore for the small portion of useful knowledge. Successful traders will not tell you their secrets, even if they do, that is still their skills. Develop your own skills.
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