There Is Only One "Correct" Way To Trade. Forex trading is not a one-size-fits-all type of activity. Traders come in all shapes and sizes, each with a unique approach to the marketplace.

There are nearly infinite trading strategies in practice, with consistent profitability being the only relevant measure of effectiveness. When it comes to excelling in the live market, one's know how is measured by profitability! A viable trading methodology is a combination of the following basic elements: Technical or Fundamental Analysis : Strategies may be based on the study of price itself or the reasons driving price action.

Many trading strategies are a combination of both technical and fundamental analysis. Duration : The length of time a position is to be left open at market is a key element of strategy definition. Intraday, day, swing or longer-term trades all have different functions, goals and risk exposure. Style : Fully automated trading or a manual discretionary approach are two examples of different trading styles. No matter which one is adopted, many nuances are present in its application to the markets.

It is important to realise that there is no right or wrong way to trade. As long as a proven strategy is adhered to with consistency and discipline, success in the forex is attainable. At the end of the day, the only "correct" way to trade is one that makes money.

Greater Leverage Equals Greater Returns. Extensive degrees of leverage are readily available in forex trading. The ability to implement a high degree of leverage ensures that a large amount of currency may be controlled by a fractionally smaller account balance. While the potential rewards of high leverage are lucrative, the risk is not always easily quantified. As the number of lots assigned to a specific trade is increased, the amount of currency risked per pip grows substantially.

In the event that an imbalance develops between the size of the open position and the trading account balance, an exorbitant risk is being assumed. If this is the case, the following elements of market behaviour can deem heightened leverage more of a liability than an asset: Periodic Volatility : Pricing volatility can spring up at any time and prove catastrophic to a highly leveraged position.

Slippage : Entering and exiting large positions can be challenging amid less than ideal market conditions. If liquidity levels are limited, considerable loss due to slippage may occur. Trade Liquidation : In the event that margin requirements set forth by the brokerage are violated, the open position will be liquidated.

This can come as a surprise to the trader, as an eventual profitable trade may be exited prematurely. No matter how great a trading opportunity appears to be, the old adage "leverage is a double-edged sword" encourages prudence in its engagement. While a sure thing may be attractive, larger positions increase possible losses exponentially.

An unforeseen swing in pricing may serve to blow out a trading account before any expected gains are made. Complex Strategies Outperform Simple Ones. The forex, and financial markets in general, are often found attractive by individuals with an academic background. Doctors, lawyers, engineers and technology professionals are drawn to the markets not only for financial reward but for intellectual challenge. It is due to the mental acuity of many participants that extremely sophisticated strategies are developed and championed.

For less experienced traders, an abstract approach may seem to be the best avenue for success. Combining intricate technical tools with proprietary software products appears to create an "edge" for the trader. However, this is not always the case. The relative complexity of a trading strategy can have very little to do with its eventual effectiveness. A historical example of this idea is the late s meltdown of Long Term Capital Management LTCM. Nicknamed the "Genius Fund," LTCM was a company that implemented intricate currency arbitrage strategies built by Nobel Prize winners, Phds and other stars of the financial world.

Profitability in forex trading stems from interacting with the market efficiently. Obtaining market access via minimal fees, securing low trade-related latency and applying structured money management can be just as vital to a healthy bottom line as strategy performance. If these elements are in place, even the simplest trading plan can prove successful. More Is Better. The extensive market hours and availability of products provide seemingly infinite opportunities for active traders.

However, attempting to trade everything around-the-clock can be detrimental to profitability. In most cases, restricting trading operations to a specific time period and group of products is the best plan of attack.

Several factors illustrate why more is not necessarily better: Limited Resources : Adequate time is needed to prepare, actively trade and document results. Attempting to trade 24 hours a day places tremendous strain on the individual and is one of the most common mistakes made by forex newbies. In addition, holding open positions in multiple currency pairings can spread capital resources thin. Liquidity Concerns : In order to trade efficiently, there must be adequate market liquidity. Less popular currency pairs are traded infrequently, meaning there is a shortage of both buyers and sellers.

Correlations : It is commonplace for currency pairs to show a correlation with one another. If true, taking trades in separate pairings may prove to offset gains or enhance losses. With so many options, opportunity is seemingly always afoot. In most cases the opposite is true. The longer one stays in the market, the greater the chance of falling victim to many pitfalls. Overtrading, lapses in discipline, systemic risk and fatigue can all destroy profitability. This was either luck unlikely , insider trading, or lockdowns were happening elsewhere prior to the NZ lockdown.

Prior to the decline in the value of the NZD, Italy, Saudi Arabia and Mongolia had gone into lockdown. Though it does highlight that there are opportunities for someone who is keeping abreast of world news and is willing to have a punt. Considering the above, you might think that Forex trading is worthwhile because you can just wait for such an event, then if you can act quickly enough you can make a quick buck.

However there are some downsides to Forex trading that make it not so simple. The shares are then sold to the next person for more money, who then holds onto them for a while and benefits from the same growth.

And how about those losses? This leads to either big gains or big losses, essentially magnifying the result of any trade. Another concern I had when researching Forex trading was that there was only one company I could find in NZ that was registered as a Licensed Provider with the FMA. So even as you study mindful trading ideas, you might also look for ways to apply these same principles to your work, relationships, and more.

From there, though, mindful trading will help you come to proper terms with those thoughts. Mindful trading, in turn, will help isolate those misplaced thoughts, empowering the individual to clear their mental queue, leaving only thoughts about the present and ensuring plan compliance , which makes the most of the trade at hand without bringing outside factors into play. For traders, we only feel as good or as capable as the outcome of our last trade.

And, in life, a bad day at work or school, or having a fight with a friend, spouse, or loved one can quickly make us feel a diminished sense of self-worth. Mindful trading in situations like these is especially valuable, as it can prevent overconfidence in good times or self-sabotage in bad before either starts.

When you work to ensure that mindfulness prevails, you trade—and live life—on a more even keel, grounded firmly in the present, and feeling more control and less stress while you do it.

FEATURED ON About author. The Lazy Trader is a publishing brand dedicated putting the fun back into finance, presenting powerful wealth creation strategies for a better world. You must be logged in to post a comment. Learn to Trade. Mindful Trading Thoughts I Practice…and You Should, Too. The following two tabs change content below.

What spurred all this off was an infographic that I received in an email this morning. This would no longer be gambling, it would be smart investing based on economic events. So I started investigating. My first port of call was to look at the NZD vs USD price to confirm my idea and see how the market reacted to the news. Upon doing so, I immediately I saw a problem: the market had reacted to the news prior to the event occurring.

This was either luck unlikely , insider trading, or lockdowns were happening elsewhere prior to the NZ lockdown. Prior to the decline in the value of the NZD, Italy, Saudi Arabia and Mongolia had gone into lockdown. Though it does highlight that there are opportunities for someone who is keeping abreast of world news and is willing to have a punt.

Considering the above, you might think that Forex trading is worthwhile because you can just wait for such an event, then if you can act quickly enough you can make a quick buck. However there are some downsides to Forex trading that make it not so simple. The shares are then sold to the next person for more money, who then holds onto them for a while and benefits from the same growth.

And how about those losses? This leads to either big gains or big losses, essentially magnifying the result of any trade. Another concern I had when researching Forex trading was that there was only one company I could find in NZ that was registered as a Licensed Provider with the FMA. Perhaps more concerning was that on the Financial Markets Authority FMA website, the article about Forex trading basically advised people not to do it, and stated that they regularly receive complaints and enquiries from consumers who have lost money in online forex trading , and that was on the second line of their page about Forex trading.

To support this, according to Stuff, the FMA receives more complaints about foreign exchange schemes than any other type of financial service provider. You have the stamina of an octagenarian sugar addict who has confused his Tic Tacs with his Viagra medicine.

Secondly, I do believe that Forex trading plays an essential role in international trade; hence should not be ruled out completely.

Forex trading or rather hedging is entirely appropriate for companies who are trading internationally and need to be able to ensure that the prices they charge their customers in one currency, can cover the Cost Of Goods Sold COGS accrued in another country. In fact, I would say that it is essential for such a company. That said, it should not be used by such a company as a form of gambling on profitability from international trade.

Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Close Menu ASX. The Downsides Of Forex Trading Considering the above, you might think that Forex trading is worthwhile because you can just wait for such an event, then if you can act quickly enough you can make a quick buck.

The fact of the matter is, that you have to know things that are absolutely impossible to know. Share on Facebook. Leave a Reply Cancel reply Your email address will not be published.

Instead of letting your life pass you by, mindfulness means living in the moment and awakening to experience. Functional Functional. The development and implementation of a sold trading plan is another crucial step which must be done before traders can enter the Forex market. By following the correct steps in starting to trade Forex, the patience of traders will be rewarded once they start experiencing more profitable trades. Business news Big Data Security Market is Designed to Soar High in Years to Come As per the report published by Fior Markets, the global big data security market

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