Study FOREX - 5 Tips For Trading FOREX Safely And Profitably

Hundreds and thousands of traders and investors buy and sell in the FOREX market every day. How do they make their money?

Let's take a look at some of the factors that any successful FOREX trader must take into account to be successful at trading.

FOREX trading deals in pairs of currencies. You don't trade a currency in isolation but as a pair. When you examine a currency to decide the direction it will take then you must also examine the other currency to see if it will reinforce your decision.For example if you examine the EURUSD and believe that the EUR is going to get stronger then also check the USD to see if it is likely to get weaker. This will greatly increase your chances of making a profit.

When you start to trade FOREX you need to treat it as if you are getting a new job. It takes time learn all the tools and techniques you need to master to be successful. You also need to practice a lot in order to iron out your mistakes.You must find the right FOREX broker who will execute your trades and the right trading platform. This software will allow you to buy and sell currencies via your broker. Fortunately most brokers allow you to trade practice accounts where by you do not have to risk any money until you have mastered all the tools.

It is impossible to make money on every trade so you must assume you will lose it. If you make this assumption then you will always protect yourself. It is very important to set a stop loss for every trade you make. This stop loss will instruct the FOREX broker to exit the trade at a predefined loss.

There is a difficult balancing act here because if you set your stop loss to close to the current price then you can whipsawed out of the trade even though ultimately the price moves back in the original direction you predicted. If you set the stop loss to far away from the price then when it is executed you lose a big chunk of your trading pot.

When you start to trade FOREX for the first time the temptation is find someone else to trade for you. There are FOREX brokers available that will trade your account for you. The problem is that they may not have your interests at heart. These brokers make income from every trade they make, so it is in their interests to trade your account as often as possible. They will make money if you are profitable or not. So it is much better to trade FOREX yourself. Invest in the time and tools to do the job and you will make money.

Another advantage for trading FOREX is margin. Here the FOREX broker will actually lend you money to trade a larger FOREX position than you could if you were only trading your own money. This allows you to make more money faster but also can be dangerous if you misuse it. When you start trading with real money you should use minimal leverage and then you can increase it as your experience increases. Using leverage affects your risk management and stop loss strategies.

Remember these points as they are key to trading FOREX safely and profitably. You must study FOREX hard in order to achieve the rewards. It is no different from any other kind of job. Be patient, consistent and professional.

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