The Philosophy Of Why Do You Need A Forex Trading Strategy
A good Forex trading strategy is important for any trader, however experienced or inexperienced they may be. With a good strategy, you can minimize your risks and make money.
The Forex market is considered to be the largest exchange market in the world. It’s fast gaining popularity as there is great possibility of earning huge profits. However, whether you are a newcomer or a seasoned trader, without a sound Forex trading strategy to guide you, you will be floundering around in the dark. Imagine a blind person trying to cross a busy intersection; that too without anybody to guide him - get the picture, huh?
Guides you onto the Right Path
When you become a trader, it is important to be consistent. A routine is essential in this respect. Once you have a routine and follow it diligently, you will have a better shot at being successful. That routine you seek for will be provided by a good Forex trading strategy. It will also help you measure your success and see what you’ve achieved at the end of the day. Without a routine, you cannot stay on track of your goals, and get results consistently. Besides having a strategy also means that you’ll inculcate a business mindset and bring in some professionalism to your trading.
You realize it's about the journey not the destination.
This applies to what was said above. If you want to create a profitable career in Forex, you need to focus more on the journey rather than the "prize" at the end. Doing so will help you test your systems more thoroughly so you know if they are built to endure through the long haul. It lets you stay emotionally balanced, even when you are going through a period of losses, and it lets you curb your enthusiasm when you're going through a string of wins. Forex is about more than just making money; there are a number of personal development lessons you'll come to realize and looking at Forex as a journey gives you a better chance of using the lessons to create profits.
You work well alone.
Most people aren't as self-motivated as they think, or as self-disciplined. However, true traders are. They are like lone wolves that can spend hours on end alone as they learn and develop their skills. It is important to have this quality as a trader because you have no one to answer to, except the market (and the market only speaks in terms of gains and losses). No one is going to tell you how to run your Forex career. No one will hold you accountable to your Forex plan and strategy. It's up to you to put in your all into becoming a proficient trader; and it is up to hold yourself accountable. If you're someone who requires hand holding, constant reassurance, or simply a boss to guide you, Forex may not be for you.
You know you will not be a millionaire in a year.
You won't even be a millionaire in three years. In fact, if you're starting Forex with the hope of becoming rich quick, you may want to reconsider the decision entirely. Creating instant wealth is a highly unrealistic goal. For one, there are too many factors a trader cannot control which play a key role in how much they make. Secondly, traders who enter Forex under the pretense of earning easy money are more prone to making mistakes and falling for Forex traps--all of which ensure that you lose more than you gain. If you are serious about creating a Forex trading career, you need to leave unrealistic expectations at the door and understand that Forex is like anything; it requires hard work, patience, and lots of discipline. Anyone who tells you otherwise is probably trying to sell you something.
You aren't afraid of failure.
It's important to note that you are not a failure simply because you lose money in Forex, but the fact is you can't come into Forex with a fear of losing or be someone that equates losing to failing. All traders, even profitable ones, go through a losing period. A trader has to focus on what they can learn from it and continue to develop their skills. A fear of failure will simply hold you back from consistent profits.
Helps to minimize Losses
For the unprepared man, the Forex Market will hold very little attraction. Without a good Forex trading strategy, he will not be able to make much headway or profit, and he is bound to get frustrated. If you attempt to trade in currencies blindly, without any clue as to what and why you are doing, you can give up any hope of striking it rich! Read my words clearly, lack of strategy is equal to financial losses. Therefore, to make the best of your investment, formulate a strategy and stick by it.
You keep learning.
Forex is not something you learn once and become a master of. The financial world changes constantly and with it does the rules of Forex trading. If you aren't willing to stay up to date, keep learning, and continuously test your knowledge you will struggle to make consistent profits. Keep an open mind as a trader.
You like to stand apart.
Creating consistent profits is heavily dependent on your edge. In order to even consider what your edge could be, you have to be someone who thinks outside the box, doesn't follow the crowd and looks to your own talents and personality as assets. The reason I included the latter is because most traders will find their edge within themselves. For example, you may be a highly focused individual, which could work to your advantage. Regardless, you need to be someone who doesn't follow the crowd and likes to stand apart if you're serious about creating an edge.
Helps you sharpen your Trading Skills.
Making errors in the Forex market is a luxury that is afforded only by newbies, since they invest relatively small amounts of money. If you want to be a seasoned trader, there is very little room for error. With the help of a Forex trading strategy you can sharpen your trading skills and try and hone it to perfection. Once you’ve set a plan for yourself, you can try and modify it according to the different situations you come across. Think of your strategy as the foundation on which your trading skills rest. Once you have a solid foundation, you can alter the exteriors of the building with ease.
The Essentials of a Good Strategy
Now that you know the importance of a Forex trading strategy, you need to know what goes into its making. These following points will elaborate what a good strategy is all about.
The Forex market is considered to be the largest exchange market in the world. It’s fast gaining popularity as there is great possibility of earning huge profits. However, whether you are a newcomer or a seasoned trader, without a sound Forex trading strategy to guide you, you will be floundering around in the dark. Imagine a blind person trying to cross a busy intersection; that too without anybody to guide him - get the picture, huh?
If you are still wondering why you need a strategy, read on to find out.
Guides you onto the Right Path
When you become a trader, it is important to be consistent. A routine is essential in this respect. Once you have a routine and follow it diligently, you will have a better shot at being successful. That routine you seek for will be provided by a good Forex trading strategy. It will also help you measure your success and see what you’ve achieved at the end of the day. Without a routine, you cannot stay on track of your goals, and get results consistently. Besides having a strategy also means that you’ll inculcate a business mindset and bring in some professionalism to your trading.
You realize it's about the journey not the destination.
This applies to what was said above. If you want to create a profitable career in Forex, you need to focus more on the journey rather than the "prize" at the end. Doing so will help you test your systems more thoroughly so you know if they are built to endure through the long haul. It lets you stay emotionally balanced, even when you are going through a period of losses, and it lets you curb your enthusiasm when you're going through a string of wins. Forex is about more than just making money; there are a number of personal development lessons you'll come to realize and looking at Forex as a journey gives you a better chance of using the lessons to create profits.
Most people aren't as self-motivated as they think, or as self-disciplined. However, true traders are. They are like lone wolves that can spend hours on end alone as they learn and develop their skills. It is important to have this quality as a trader because you have no one to answer to, except the market (and the market only speaks in terms of gains and losses). No one is going to tell you how to run your Forex career. No one will hold you accountable to your Forex plan and strategy. It's up to you to put in your all into becoming a proficient trader; and it is up to hold yourself accountable. If you're someone who requires hand holding, constant reassurance, or simply a boss to guide you, Forex may not be for you.
You know you will not be a millionaire in a year.
You won't even be a millionaire in three years. In fact, if you're starting Forex with the hope of becoming rich quick, you may want to reconsider the decision entirely. Creating instant wealth is a highly unrealistic goal. For one, there are too many factors a trader cannot control which play a key role in how much they make. Secondly, traders who enter Forex under the pretense of earning easy money are more prone to making mistakes and falling for Forex traps--all of which ensure that you lose more than you gain. If you are serious about creating a Forex trading career, you need to leave unrealistic expectations at the door and understand that Forex is like anything; it requires hard work, patience, and lots of discipline. Anyone who tells you otherwise is probably trying to sell you something.
You aren't afraid of failure.
It's important to note that you are not a failure simply because you lose money in Forex, but the fact is you can't come into Forex with a fear of losing or be someone that equates losing to failing. All traders, even profitable ones, go through a losing period. A trader has to focus on what they can learn from it and continue to develop their skills. A fear of failure will simply hold you back from consistent profits.
For the unprepared man, the Forex Market will hold very little attraction. Without a good Forex trading strategy, he will not be able to make much headway or profit, and he is bound to get frustrated. If you attempt to trade in currencies blindly, without any clue as to what and why you are doing, you can give up any hope of striking it rich! Read my words clearly, lack of strategy is equal to financial losses. Therefore, to make the best of your investment, formulate a strategy and stick by it.
You keep learning.
Forex is not something you learn once and become a master of. The financial world changes constantly and with it does the rules of Forex trading. If you aren't willing to stay up to date, keep learning, and continuously test your knowledge you will struggle to make consistent profits. Keep an open mind as a trader.
You like to stand apart.
Creating consistent profits is heavily dependent on your edge. In order to even consider what your edge could be, you have to be someone who thinks outside the box, doesn't follow the crowd and looks to your own talents and personality as assets. The reason I included the latter is because most traders will find their edge within themselves. For example, you may be a highly focused individual, which could work to your advantage. Regardless, you need to be someone who doesn't follow the crowd and likes to stand apart if you're serious about creating an edge.
Helps you sharpen your Trading Skills.
Making errors in the Forex market is a luxury that is afforded only by newbies, since they invest relatively small amounts of money. If you want to be a seasoned trader, there is very little room for error. With the help of a Forex trading strategy you can sharpen your trading skills and try and hone it to perfection. Once you’ve set a plan for yourself, you can try and modify it according to the different situations you come across. Think of your strategy as the foundation on which your trading skills rest. Once you have a solid foundation, you can alter the exteriors of the building with ease.
The Essentials of a Good Strategy
Now that you know the importance of a Forex trading strategy, you need to know what goes into its making. These following points will elaborate what a good strategy is all about.
- Identify your goals and make them realistic
- Fix a time when you will sit down to analyze the market and plan out the trade. Along with this, also decide when you are going to transact and observe the market
- How often are you going to check the market and at what specific times?
- What’s the maximum percentage that you can afford to risk on each transaction?
- How many lots are you planning to trade?
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