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More than funds are at stake when trading currencies, you are putting your reputation as a well informed decision maker on the line. Credibility is without a doubt your most valuable asset, so how does one secure credibility in the Forex market? By developing a winning strategy and sticking to it. Let’s explore how we can accomplish this task, we’ll simplify it by breaking things down into 3 easy steps in this easy to read article.

A trading system is a easy way of saying, how does a forex trader decide when to enter or exit the market and how much leverage should he use on apiece trade. Each trading system is prefabricated essentially of 3 key components. 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 calibre of a Forex trading system.

1 – When to enter the market

The calibre 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 acquirable 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 calibre of trades you make on a regular basis. The calibre of your each day life is going to be influenced by this as well. Needless to state there are countless traders who spend almost 24 hours a day watching their monitors in fear that they will miss the next huge move. 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 state is true. Your lifestyle should be one where you are healthy to enjoy the pleasures of living a full and abundant life without having to constantly look at the clock.

2 – Exiting the market

Once you have entered a trade you should already have an exit strategy in place. This strategy on when to exit can include variables such as duration: I will exit position after 10 hours whether in profit or loss. Your exit strategy might also be price based: I will close this position out when a certain value of profit or loss is achieved. 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 plateau 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. On any given trade you should have firmly established criteria which will determine how many lots you will use. A hazardous 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 might be sound in strategy, however it is essential that your trading rules are written before your trade is placed. Please do not under estimate the power of emotions. You will not meet a single successful trader who hasn’t learned to separate his emotions from his trading to some degree. 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. Professional fund managers use these techniques to make million dollar decisions each day.

The joy of mastering your emotions grants you to experience them without the fear that they might end up controling you, this is a massive part of becoming a professional investor. Emotions are not your enemy, they only become your enemy when you grant them to influence your strategy. A reputable Forex trader is not a zombie, or a organisation that turns out trades without thinking or blinking; the goal of each Forex trader is to create a lifestyle which promotes an inner sense of accomplishment. Putting these 3 keys into practice will evolve your trading style and help you to achieve the level of success which a few international elite traders enjoy on a regular basis.

Choosing your Forex trading strategy is a significant part of beginning your Forex career. Basically, the two strategies are fundamental analysis and technical analysis. These are the same in the Forex market as they are in the equity market. Most Forex traders use the technical analysis strategy because it is simpler.

Below is a brief overview of apiece strategy and how they are used in trading Forex:

Technical Analysis
Technical analysis being the most popularly used strategy, we’ll begin with it. The application of technical analysis is almost the same in the Forex market as it is the equity market. Technical analysts examine price trends. There is only a single difference and this arises from the fact that the Forex market is open for 24 hours a day. This changes the time frame that analysts are used to from the equity market.

Because of this, your technical analysis has to be modified a but so it can work in the 24 hour Forex market. The general forms of technical analysis are:

~ The Elliott Waves
~ Fibonacci studies
~ Parabolic SAR
~ Pivot points

In order to predict trends more accurately, many technical analysts use a combination of these studies. The most widely used combination is Fibonacci studies with Elliot Waves. But others do select to create trading systems in an effort to continually locate related buying and selling conditions.

Fundamental Analysis
Imagine valuing an entire country, if just valuing one company is challenging enough. Because it is often so complicated and difficult, fundamental analysis in the Forex market is usually just used to make long-term predictions of trends. However, some daring traders do use it in short-term trading. There is a wide assortment of fundamental indicators of currency value. A few are:

~ Retail sales
~ Purchasing Managers Index (PMI)
~ Consumer Price Index (CPI)
~ Durable goods
~ Non-farm payrolls

There are more fundamental factors that you have to watch, as well than just these five. A variety of meetings are acquirable where you can get quotes and commentaries that sometimes affect the markets just as much as the reports. Other things that influence the Forex market are also discussed, like interest rates, inflation, etc.

Just taking the time to look at commentary and reading reports can be extremely helpful to Forex fundamental analysts when trying to comprehend long-term market trends as well as trying to weather fluctuations in the market.

Choosing Your Strategy

Perfecting your chosen trading strategy and working out the details of it is highly important. It is what most successful Forex traders will advise you to do before actually jumping into the market. There are many options acquirable and many ways to create your own method and style. Some traders will work on a broad analysis of trends, and others will focus on a certain study or calculation. Everything is up to your decision and what you think about to fit your way of trading best.

Demo accounts and practicing with “paper money” is a highly-suggested way to develop your strategy. If you work all the kinks out of your strategy this way, you won’t have to worry about risking your money in an untried investment in the market. By using a demo account, you can be positively sure that you comprehend trading before you actually take the dive.

Knowing your strategy and being ready to act on it is critical as the Forex market is becoming the largest in the world and so many traders are being drawn to it.