On this article we are going to explain how to trade Forex. Some weeks before, we already explained what is the forex exchange market and what is forex trading. Let’s make a quick review to be sure that the main concepts are clear, before we start talking about how to trade Forex.
What is Forex Market
Every day Euros are being exchange for Dollars, Dollars for Yens and Yens for Euros. This represents part of the exchanges done on the market called Foreign Exchange Market (also known as Forex). This market is organized on how the rates change between the different established currencies. Let’s put a simple explain in order to clarify the concept:
John and Mary are going to spend the weekend in London, they estimated the amount of expenses at 300 Euros. As Great Britain is not part of the Eurozone, they have to buy British pounds. They go to the bank to exchange 300 Euros for British pounds. At the moment of the transaction one euro is 0.8661 pounds. John and Mary will get 259.83 pounds for the 300 Euros. This money transaction took place on the front Exchange Market. Behind this transaction there is Peter. Peter works in a bank as a trader. Every day he gets British pounds buying requests and Euro buying requests. As for all goods price, here the exchange rate of currency is set by supply and demand. As the request of British Pounds goes up against euros, a balance is created and if the British pound exchange rate increases, the British Pound will get stronger compared to the eures.
So even though tourists doesn’t know how to trade Forex, they are, in fact, trading Forex. But they are not the only actors on this worldwide market, good and services companies, states, investors and even speculators, act on the Forex Exchange. To summarize the Forex Exchange Market is made up by the sales and loan burrow transactions in currencies.
How to trade Forex
Now we will explain some tasks that you should do before you understand how to trade Forex. Trading Forex is a very difficult activity that needs very high concentration, so you should understand the hard effort that is needed to survive in intraday markets.
Let’s start wit some minimum conditions that should happen so that a novice trader can act as a professional operator and consider the difficulty of this activity. It is not about showing any kind of Holy Grail, but about making the reader see the hard effort that is needed to survive in intraday markets.
There are always sensations that tell you what to do and what not to do. In the market the sensation is the same and in almost all cases you must pay attention to your subconscious that is who mark whether you should do something or not. Every day when the traders get up and think about how to trade forex that day in terms of how they find theirselves on that day. Most days the feeling is good and enters the market to find one well.
What is recommended is a little exercise in the morning before starting to operate for that the blood of the body is oxygenated, and the concentration is maximal. Cannot start to try to win to the market those days that we do not have body or head for it. This days when we have not slept well, we are sick, moody, worried, even anxious We Should Not Operate. Breathing deeply before you begin to look at the market will give us confidence and relaxation so that the traps of the market and the movements that we have in the head are seen more clearly. Saying I am not operating today because I am not feeling 100% right is one of the most difficult tasks. This happens because there are many traders who want to learn to run and do not understand that the trading is a race of bottom.
While it is true that every trader in the beginning needs and wants the more hours and operations to correct errors. It is also true that another of the absolute rules in trading is that, the more you operate the more you lose. This is not a matter of number of operations: 1 is OK and 45 is too much, for example. It’s about taking a scale in which we feel comfortable without making us suffer and respecting the management of capital. It is also not logical to think that if we had had a good streak this will continue forever. It is difficult to do, but it is absolutely necessary after a good run to leave the trading for having fulfilled the objectives.
When you are your own trading coach you will have to be tighter with yourself and self-punishment in order not to lose control of the situation and to understand how to trade Forex correctly.
We want to emphasize at this point that there is an almost identical similarity of behaviours of the personal relationships in real life and the behaviours we carry out in the market. Here there is an example that everyone can understand: if a trader arrives always late, he must understand that in the Forex markets he will do same, but the consequences are slightly different. We must find a personal situation in which we are relaxed, and we are not impulsive, have the things clear and see the market like any other business.
It must be very clear that the average of time you will need to be a profitable trader are 10 years. You have to keep in mind that the road will not be easy, will not be short and in many cases, you will suffer the Forex market. The only good thing that the learning process has is that once we have already advanced, that’s it! We wouldn’t feel anger when we skip the stop or excited when we win. Only then will be when the Forex market begins to shake hands with us. Being very ambitious in the Forex market expose ourselves to the risk of ruin or at least to ruin the gains we have obtained with little effort.
So our conclusion on how to trade Forex is very simple: trade Forex while you are relaxed and with peace of mind, listen to yourself. Is very important to feel 100% concentrated in what you are doing in order not to lose all the efforts you’ve been doing. Moreover, if you do not feel comfortable with the idea of trading Forex by yourself, the best option is to contract a service of Forex managed accounts as the ones that we offer in FxMAC.