Forex Trading Strategies For Noobs

Like everything else in life - to be successful, you either have a plan or you fail. Forex trading is no different, and considering the leverage and volatility involves, you need a plan more than most things in life. While mainstream skeptics wave off Forex trading simply as gambling, it has been proven over and over that if given enough time to culture your skills and knowledge, you can be as successful as the top traders in the market.

This post aims to give you the basics to get started, outlining some of the most fundamental but effective Forex trading strategies.

One of the most popular strategies experts employ to trade Forex is Day Trading. As the name speaks for itself, it simply refers to closing all trading positions within a trading day. This strategy thrives at taking profits off relatively tiny fluctuation in a particular day's price movements for a selected pair of currencies. Generally, a Day Trader would enter and exit the market a couple of times in any given trading day.

While Day Trading may sounds simple to you after the above explanation, you'd be surprised to see the diverse varieties of "systems" or "approaches" that have been adopted by different Day Traders. Some traders prefer to go in and out of a trade within seconds (that's right, seconds) and capitalize on really tiny movements, which is known as scalp trading. Others make use of longer trade durations from a few minutes to a couple of hours.

You may be wondering how would a trader be profitable based on a couple of seconds of trading? Well, it wouldn't be possible without Leverage, or so called margin trading.

Typically, Day Trading depends heavily on scheduled economic indicator release, or news releases, whichever you prefer to call it. A couple of weeks into currency trading, you'd have realized that the market is almost "dead" before major releases like NFP, and suddenly sprung to life after the release. Sometimes, you'd have thought "the market has gone crazy!". Due to the potentially huge price movements right after a huge news release, its recommended for new traders to "wait it out" and get in once the market is "settled down" after a couple of hours. This could seriously help you to stay away from broker reqoutes and slippages. In addition, you could earn yourself a bit of time to see what people are talking about the release before making your side. If its a real trend, you have a real friend.

Never perceive Forex trading as a means to get-rich-quick! Yes, you can get rich, but the "quick" mentality has caused more havoc to newcomers than anything else. It creates GREED, and that's something that hinders a trader - even the good ones - from thinking clearly and logically. Back to the main topic, regardless of your trading approach - day trading, scalping, news trading and so on - you'll need to have a valid trading strategy in Forex. Here's a few good questions to ask yourself:

1. How much losses are you willing to take for each trade?
2. How much profits will you call it a day?
3. What if you don't meet your target for the day or week? Are you willing to take more risks just to achieve it?
4. Historically, how well does your Forex strategy do?

If you have answers already for the questions above and stick to it, you are on your way to success with Forex trading. If you don't, then read up on my post about Forex signals and re-evaluate your current trading regime.

Anyway, there's more to it, though, read on.

Be aware that when you have set a profit target and hit it, you should take your time off for the day. Don't get carried away by a good winning streak and let it cloud your judgment. A winning streak doesn't make you a George Soros, it just prepares you for the coming losses better. There's no such thing as a strategy that wins every time. A brilliant Forex strategy lets you win more than you lose, and make you richer at the end of the day. Know that the market is much like God, and it doesn't answer your prayers every damn time. When its time you get some losses, take it with a smile and accept it.

If you aspire to become a day trader, you should first come up with a strict risk management plan - how much % are you willing to risk (it means lose) for every trade? Some experts suggest 1% - 2% and when you tell them you are at 3% they will cry and shout and call you fxcktards. 1% or 2% is great figures, but really, it depends on your trading strategies, since none is made the same, right? Your job is to ensure that whenever you have a say, 10 consecutive losses, it wouldn't ruin half your balance and you're fine.

Have a plan before you enter the market and know when you should get out even before getting in. Know how much you should risk for every trade. Follow these rules like words carved in stones and you're already halfway to your road of success!