How To Successfully Trade The Forex Market

Anyone that has investigated forex trading on the Internet knows that it is an industry full of scams. If you were to believe the outlandish claims made by many on the internet, you might be mislead into thinking that forex trading is easy, and that it you can be profitable by simply making one easy payment of $99.95. As someone that has traded for a long time, I can tell you that this certainly isn't the case.



It is possible, however, to make a significant amount of money from the market, but your approach has to be grounded on solid underlying principles and an understanding of market dynamics. The first step of the process is to figure out what kind of trader you are most suited to be.

Most people either trade technically, fundamentally, or a combination of both. Technical traders base their market decisions primarily on price, and its graphical representation on charts. They often use indicators based on price to further define their entries and exits in the market. However, you must remember that these are merely tools; in the end, you should spend a significant amount of time learning how the market works, and trying to determine periods of what you believe to be non-random behavior. Once you have identified such periods, you can refine them into your market edge, and then figure out how to consistently capture that enough to be profitable.

Fundamental traders, on the other hand, base their market decisions on macroeconomic trends and forecasts. For instance, a fundamental trader would sell the dollar if they believed that it should get weaker, based on their assessment of global economic factors. They aren't often as concerned as technical traders with the current market price, believing that the market will ultimately move to reflect their understanding of these economic factors. Those that trade on this basis often take longer-term positions than the technical traders, since the fundamentals can often take sometime to properly manifest themselves.

Many people combine both types of analysis to make their trading decisions. For example, someone might only trade in the direction that confirms their fundamental assessment of the market, but will determine their specific entries and exit positions based on price through technical analysis.

Obviously, this only scratches the surface of what someone should learn to be a successful forex trader. Money management is another significant factor. You should learn about appropriate position sizing, to ensure that you will not lose more than a specified amount on any given trade. Risking too much of your capital on a couple trades is one of the main reasons that people lose a lot of money. Finally, it is extremely important to realize that no position is ever a sure thing, and the market can always move against you, even in a trade that you are completely certain will go in your direction. If you have respect for that concept - and are following a consistent strategy based on an understanding of market dynamics - you will have a much better chance of being successful.