It’s no secret that the Forex markets are hot these days. Active traders who have become disillusioned by the stock market as well as new traders wanting a viable way to build wealth are joining the ranks of online forex traders daily. The lure of forex is vast due to its leverage and possible large profits. Yes, huge profits can and are made by seasoned forex traders. These seasoned traders have done their homework, paid their dues and done what it takes to become very profitable. Most who begin forex trading will fail for one simple reason; they fail to use a system that’s effective for trading forex.
Stock traders, even experienced and profitable, are coming to forex from the stock market in droves with their trading systems. What they are finding is these systems do not necessarily translate into profits when trading forex. Forex is truly like no other market on earth and can humble even the most successful stock trader. These traders need to remember their roots and what it took to become successful in the stock market; experience. You need to start over from the basics! Although your learning curve will be quicker than the complete novice, you still need to find a viable system that will be profitable in forex and chances are it will not be the one you used to trade stocks. New money management techniques apply with forex and will also have to be mastered.
New traders entering the forex markets generally have the hardest time realizing a profit due to complete inexperience. They read all the positive hype concerning forex trading and enter the market with nothing but high hopes. Most find out quickly that it takes much more high hopes to be profitable. The complete new trader will have to learn to control their emotions, money management, risk reward as well as have a viable trading system. Fortunately, these are all learnable and many who never traded anything else before are successful in forex.
I believe the most prevalent reason for failure in forex is the phenomenon we have all heard of and come to know as the “automated forex robot” These overhyped software programs enable the trader to trade automatically without being at their computers. While some programmers are able to build their own robots, most of us are at the mercy of commercially available robots (also known as expert advisors). Most of the commercially available trading robots are nothing but rubbish in my opinion. The ones that do seem to work initially eventually fail due to overuse. Many traders get lost in a vicious cycle of purchasing one robot after another and fail to realize the most important aspect of trading forex; using and understanding their own trading system.
Creating a trading system is not hard but it does require the trader to learn a thing or two about technical analysis and its correct application on a currency chart. For example using candlesticks is a very popular trading system but its applications are frequently misused. I place trades using candlesticks on a daily basis and would expect my profits to be larger than the average forex trader. Others give candlesticks a try but don’t apply them correctly and fail miserably. I use this example because candlesticks are often used but frequently misinterpreted. Whatever the system, understand how it reflects market psychology. It’s important to remember you’re trading against other traders and it pays off to learn when buyers or sellers have the upper hand.
The forex markets are a great place to build wealth if you’re willing to put in the ground work. Many forex traders go on to build a trading business from home and trade full time. Many others find they can build a nice nest egg rather quickly due to the leverage the forex markets offer. Don’t become a forex trading statistic! Do your homework and test plan on a demo account before trading actual money. Understand what you are doing and why before ever placing your first trade.