The Secret Keys to Currency Trading

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The Secret Keys to Currency Trading - By: Aaron Stokes, Posted on: 2007-09-16

Becoming a reputable Forex trader requires having a successful trading system. To the average Forex trader making more than 5% a month is highly unlikely. The only guaranteed way to become a reputable trader is to develop a good trading system. In this article I will answer your question: How can I become a reputable Forex trader? After reading this article, you will better understand what you should look for as a professional Forex trader.

A trading system is a simple way of saying, how does a forex trader decide when to enter or exit the market and how much leverage should he use on each trade. There are 3 elements to a successful trading system. The trade entry timing, trade exit timing and deciding on the proper leverage. These three elements alone are what we look at when assessing the quality of a Forex trading system.

1 - When to enter the market

The quality of your system is going to be reflected by the amount of time you as a professional Forex trader are willing to commit to trading your system. For instance, if you are generally available during the hours of 8am to 4pm then it would not be logical to develop a system which enters during the hours of 2am to 6am. Deciding on which hours you are willing to commit towards trading Forex will determine the quality of trades you make on a regular basis. The quality of your every day life is going to be influenced by this as well. We all know of the traders who aren't able to pull themselves away from the screen, there is a thin line between addiction and dedication; the fear that they will miss the next great trade opportunity is highly based on an indecisive trading strategy. This is not how I would describe a high "quality of life" and this is definitely not the path towards becoming a reputable trader. If you have experienced chart gazing for more than 10 hours straight then you know what I say is true. Your trade entry times must be comfortable for you to implement into a leisurely lifestyle.

2 - Exiting the market

Once you have entered a trade you should already have an exit strategy in place. This exit strategy may be based on duration: I will exit position after 10 hours whether in profit or loss. Your exit strategy may also be price based: I will exit position when either a profit of 15 pips is reached, or a loss of 15 pips is reached. A combination of the above two mentioned criteria can be used. A number of other exit strategies including the use of technical and fundamental indicators can also be used, however the important thing to keep in mind is that an exit strategy must be in place before ever entering into a trade. This is not improvisational trading and your goal is not to constantly invent and reinvent the proverbial "traders wheel" so to speak. If your goal is to become a reputable Forex trader you need to make a plan before you enter the market and dedicate yourself towards sticking to it. If you do this you will be well on your way to achieving your goal.

3 - Use proper leverage

No table can stand on 2 legs alone, leverage is undoubtedly the essential 3rd leg to any successful trading system. As a Forex trader knowing how much leverage to use on any given trade can be the life or death of your account. The level of leverage you want to use should always be predetermined long before you enter the trade. A dangerous place to find yourself might be adding lots to a losing position in the hopes that it will turn into a winning trade, or compulsively closing out half of your position before your target is met. These two actions when carefully planed ahead of time may be sound in strategy, however it is essential that your trading rules are written before your trade is placed. It just cannot be emphasized enough, emotional trading will lead to disaster. Emotional trading will cause you to increase or decrease your leverage based on how you feel in the moment, and in that moment your emotions will trick you into throwing your entire trade plan out the window. By creating a plan which includes when to enter, when to exit and how much leverage to use you will become free to execute your trades without the fear that your emotions will get in the way. This is how expert Forex traders move around in the market.

The benefits are far reaching, once you have learned to stick to your plan you are free to begin experiencing the emotions that come with being a successful trader. Emotions are not your enemy, they only become your enemy when you allow them to influence your strategy. Our goal is certainly not to turn man into machine, or to remove that part of the human spirit that allows us to experience pain and pleasure; the goal of every Forex trader is to create a lifestyle which promotes an inner sense of accomplishment. By sticking to the above 3 points you will find a new path unfolds before you, one which will lead you to Forex trading success.

Article Source: http://higradesearch.com

An expert Forex trader managing accounts internationally, Aaron Stokes brings guidance to Currency Traders sharing his insights on topics such as leverage, system development and technical analysis. His managed Forex program offers returns in excess of 10% per month. Aaron Stokes is currently ranked in the top 10 on Google.com For more information visit: www.forex-cipher.com

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