Forex Trading Simplified

8 EASY STEPS TO FOREX TRADING SUCCESS

1) There are basic steps to master when first beginning Forex Trading. Many different issues come into play when implementing successful Forex Trading strategies.

2) Of course, conducting your very own Forex Trading program can be very lucrative and is the best home-based business there is.

3) Now, let’s explore some of the important parts of a solid Forex Trading Simplified plan.

Here you will learn what Forex is and what it will do for you. To begin, you need to understand the meaning of the term "Forex". It means FOReign EXchange market. This is the international foreign currency exchange market where all types of currencies are bought and sold. The Forex market started in the late 1960's when floating currencies and free exchange rates were first introduced worldwide. At that time, the Forex market traders were the only players in the market. They alone decided on the value of one type of currency against another. All solely based upon a particular currency's supply and demand.

The Forex market is very different for several reasons. This is one of the very few markets that is free from any external controls and cannot be manipulated. It also requires little or no trading qualifications. There is no doubt it is the largest worldwide financial market. In 2007 worldwide trading reached 2 trillion US$. The money moves around so fast it is not possible for a single trader to make any major change that would affect the price of any international currency. Also, unlike Stocks, Forex traders are able to open and close their positions all within seconds. This is due to the fact that there is always a large number of willing and eager buyers and sellers.

STEP 1 FINDING A FOREX TRADING STRATEGY THAT WORKS WITH MINIMUM OR NO LOSSES

To be really successful in Forex Trading you must use your own trading strategy. Some traders rely only on technical analysis; others will prefer a more fundamental approach. It should be noted here that most successful traders use some form of available and automated trading software to maximize trading opportunities and minimize excessive time in front of a monitor.

It is necessary to have a trading strategy that gives you an “edge” in your trading the market, discipline to use it, and solid money management. See if you can answer below questions:

1. Do you have a special trading advantage/skill..?? What is it..?? If you don’t know, then you don’t have an advantage or special knowledge.

2. Consider your discipline……do you really follow your trading strategy without fail, even after two successive losing trades..?? Or, do you simply drop the strategy and move on to the next one..??

3. Consider your money management: are you allocating an appropriate fund amount and also controlling the amount of risk on each trade..??

Almost all traders fail because they cannot answer “Yes” to all three questions. The secret to obtaining the discipline needed to be a winner is to have a strategy that provides a winning edge, includes sound money management practices and is simple to use.

Any trading programs that you use should be completely automated, not require extensive technical knowledge, and NOT require sitting in front of a PC monitor all day as most software programs do. I have found a few, very few, software trading programs out there that meet this requirement and really do work.

STEP 2 TRENDS

You must understand that Forex market prices always move by trends. In fact, there are certain movements that have been studied over several years to identify these trend patterns. Such trends must be understood in order to have a good trading strategy. For any account of US$ 20,000 and under, trading with a specific trend understanding will maximize your odds of making a profit. A lot of new traders seek to trade in all different directions at the same time when they should be focusing on more simple trend patterns.

STEP 3 TRADING ACCOUNT SIZE TO USE

There is not one single right answer to this question. To start with, you should only use trade funds that you can afford to lose. Forex brokers allow you to trade standard and/or mini lots. The margin depends on the pair you are trading. For a standard lot it is around $1,000 and for a mini lot it is around $200. Technically, you could open an account with $400 and trade 2 mini lots. Obviously, you would be violating your basic risk management rules and most likely would end up losing your "grubstake".

You must never risk more than 2% of your account size on any one trade. Therefore, if you take out 1 mini lot and risk 50 pips, that would be approx $50 of trade risk (assuming a US dollar counter currency pair). In other words, you must have an account size of at least $2,500 ($2,500 x 2% = $50) to take out that specific trade without violating your risk management rules.

STEP 4 TOP FOREX PAIRS TO TRADE

Not all Forex pairs are suitable for trading. We need to find liquid markets that have enough price movement to make a trade worthwhile.

The following pairs are the most universally traded, are the most liquid pairs, and the only ones that I would even consider trading. They are not listed in any particular order:

GBP/USD - British Pound Sterling/US$ EUR/USD - Euro/US$ USD/JPY - US$/Japan Yen USD/CAD - US$/Canadian Dollar USD/CHF - US$/Swiss Franc

In fact, to further ease your Forex trading, you should limit your trading to the two most liquid and widely traded pairs: GBP/USD EUR/USD Following this recommendation alone will really reduce demands on your trading time without giving away any profit potential.

STEP 5 BROKER ACCOUNT OPENING

To open a Forex account, you simply fill out a broker application and provide the necessary ID. The application likely will include a margin agreement stating that the broker will be allowed to intervene in any trade which appears to be risky.

This agreement is made to protect the broker’s margin interests since trading is done with the broker's funds. However, it is strongly advised that you establish an account and fund it 100% and never use any margin provisions.

STEP 6 HAVE TWO ACCOUNTS

For new Forex traders it is highly recommended to have two accounts; One as a demo account and another as your “live account. Use the demo account to learn the trading game and to test the best alternative market moves. Also, use a demo account to follow your “live” account trades so you can determine if you need to make any corrections or trade changes.

STEP 7 CHART REVIEWS

This is critical. always review the One Hour - Four Hour - and Daily charts that pertain to your specific trade setup to determine actual status and any movements. Some traders also trade at 15 and 30 minute time intervals. However, this requires some experience and is not recommended for new Forex traders.

STEP 8 FINALLY UNCOVER THE BIG MONEY OPPORTUNITIES WITH FOREX TRADING

In most cases, Forex markets are just like any other liquid markets such as stocks, bonds, or commodities. However, there is one major difference with the Forex markets. That is the trends are stronger and longer lasting and occur much more frequently than do trends in other markets.

It is quite common for a Forex pair to begin a new trend that will last for many weeks and sometimes months. I refer to these events as the “Forex Major Event”. When you combine these Major Event trends along with the ability to leverage a small account, this is where you can find the favorable opportunities trading Forex. Major Event trends have been known to often give 300 to 800 pip ranges. Now, those are really and truly BIG money opportunities.

In conclusion, Forex Trading success requires an understanding of: trading strategy, trends, account size to use, best Forex pairs to trade, etc. To ensure your trading success it is critical that you stay with a trading plan and treat it as a business. You need to always track your results and make necessary changes and improvements as you progress.

It should be noted that several additional and important Forex issues have been finally uncovered, however, they could not be covered in the short space given here.