Forex trading philosophy

Forex trading philosophy is no road to ruin

If you enter the world of forex trading for the first time then you can be the start of trade in the belief, as stated on almost every Exchange site visit, that trading offers a "risk free" profit and "high returns" for "low investment." Well, that certainly is a grain of truth in these allegations, but they paint something simplistic view of trading, which in reality is a bit more complicated.

For most novice traders is the case of opening the account, and then dive directly into the trade and, at this point, most newcomers make two mistakes. The first is to start trading without a clear strategy for trading decisions they make and the second is to let emotions rule their decisions. They choose the currency pair that they feel offers the opportunity for profit and jump straight into the fear that if we do not act now, the opportunity will pass. They then see how the market moves against them and closed its position in panic, only to then see the market recover. They made their first loss and is probably far from happy.

Within the foreign exchange market There are five main trading groups - governments, banks, corporations, investment funds and individual traders. Each of these groups has its own specific objectives and, more importantly, with the exception of individual traders, has a very specific set of rules and guidelines for trading and is responsible for trading decisions it makes. This leads to very disciplined trading and, more often than not, is why major trade groups are so successful.

To succeed in forex trading the sole proprietor, has taken the time to study the foreign exchange markets and to learn the ins and outs of foreign exchange trading, has a very disciplined approach to trade and commerce must be clearly defined strategy and philosophy.

Trading decisions should never be based on emotion and should only be made on the sole basis of knowledge and experience and sound analysis of current market conditions. In particular trader should apply his technical knowledge to the analysis of tables and clearly and carefully plot the points in which he will enter and exit each individual trade. It will not only increase its profits, but most importantly, it will reduce its losses.

Certainly there are substantial profits to make the foreign exchange market by individual traders, but to achieve these gains, two things are required. The first is knowledge of the foreign exchange market which can only be acquired through learning and experience. The second is a clear trading philosophy which gives a strong sense of direction to trading decisions.