5 Things you MUST know BEFORE you trade the forex market
Article by Mo Caffoor
Forex trading can be a very lucrative home business. A business that only requires from a few minutes to a few hours a day, depending on what kind of trader you are.You can very easily make for example, 0 per day but at the same time you can just as easily lose 0 or more.
The trick in trading the forex market is judging when to enter and what your risk / reward ratio should be.
Here are my tips to help you minimise your risks:
1. ONE CURRENCY PAIR. Stick to trading ONLY one currency pair. For example the GBPUSD pair. Do not try and trade many pairs at the same time until you become quite good at one pair. Study this pair, treat it like your baby until you get to know the ins and outs of it. Check its mood, how it reacts to news and trading times.2. TRADING TIME: Using the GBPUSD example, we know that this pair is most active from around 6AM GMT till about 4PM GMT. European markets open at 6AM GMT and London market opens at 7AM GMT with the US market coming in at 12 NOON GMT. So this means there will be a lot of volatility during these times. Ideal time to trade3. TREND: The Trend is your friend.A very important rule. See what direction the pair is moving in and enter trades ONLY in that direction. One of the simplest ways to see the trend is move the time frame from 1hr to regular and visually see what direction the trend is following either up, down or sideways. If the trend is sideways, market has not decided yet, so ideal move till a trend has commenced.4. TIMEFRAME: If you are day trading, I would recommend the lowest timeframe to look at should be the 1 hour timeframe. Any lower could lead to a lot of noise and false breakouts.5. RISK/ REWARD : Only enter trades where you feel the reward / risk ratio is at least 1:1, preferable a higher ratio. This will help you during the times when you trade fails. Believe me some of the trades will fail. There is no holy grail in forex trading.
Someone once said, forex trading is the easiest HARDEST money you can make. Another said, envision yourself sitting in the back seat of a automobile covering the back, all you see if what has already happened. This means you really do not know which way the driver is going UNTIL he has done that. It is the same with forex trading. Trading really to me, boils down to the law of probabilities. So to make it a high probability trade, one must make sure the fundamentals of trading shown above must be present before we enter a trade.
About the Author
Mo owns http://www.cyberprofits.bizYou can download a FREE Ebook titled 17 money making candlestick formations fromhttp://www.cyberprofits.biz/17candlestick.html
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