How To Become A Successful Forex Trader Retail traders just starting out in the forex market are often unprepared for what lies ahead and, as such, end up undergoing the same life cycle: first they dive in head first - usually losing their first account - and then they either give up, or they take a step back and do a little more research and open a demo account to practice. Those who do this will often eventually open another live account, and experience a little more success - breaking even or turning a profit. To help avoid the losses from hastily diving into forex trading, this article will introduce you to a framework for a medium-term forex trading system to get you started on the right foot, help you save money and ultimately become a profitable retail forex trader. Why Medium Term? So, why are we focusing on medium-term forex trading? Why not long-term or short-term strategies? To answer that question, lets take a look at the following comparison: Type of Trader Definition Good Points Bad Points Short-Term (Scalper) A trader who looks to open and close a trade within minutes, often taking advantage of small price movements with a large amount of leverage. Good Point : Quick realization of profits or losses due to the rapid-fire nature of this type of trading. Bad Point Large capital and/or risk requirements due to the large amount of leverage needed to profit from such small movements. Medium-Term A trader typically looking to hold positions for one or more days, often taking advantage of opportunistic technical situations. Good Point :Lowest capital requirements of the three because leverage is necessary only to boost profits. Bad Point : Fewer opportunities because these types of trades are more difficult to find and execute. Long-Term A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. Giood Point : More reliable long-run profits because this depends on reliable fundamental factors. Bad Point : Large capital requirements to cover volatile movements against any open position. Now, you will notice that both short-term and long-term traders require a large amount of capital - the first type needs it to generate enough leverage, and the other to cover volatility. Although these two types of traders exist in the marketplace, they are often positions held by high-net-worth individuals or larger funds. For these reasons, retail traders are most likely to succeed using a medium-term strategy.
Posted on: Wed, 30 Oct 2013 05:18:25 +0000
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