How Can I Start Making Money on Forex? (part 2)

Develop Your Strategy: 

This is the most important step to master the Forex market. You can use your technical analysis skills to define a trading strategy from scratch. Define it and test it deeply before you commit real money to it. 

You can also visit some websites in order to learn their own strategies and techniques.

Test Your Skills With Virtual Money: 

Before you commit your hard earned money on a strategy or system, you should test it on a demo account. With this test, you will be able to know how good your strategy is and you won’t risk a dime. Visit a Forex broker and open a demo account. It’s 100% free and it will allow you to grow as a trader.

Keep a Trading Diary: 

Keeping a detailed trading diary is what makes you grow as a trader. This is what allows you to learn from your experience. Good traders usually have great trading diaries while bad traders simply don’t care about them. On your trading diary, you should annotate all your trades as well as describe all the reasons that made you take the trade. You should also annotate your pace of mind when you entered the trade and during the trade. Was there any economic release while you were holding a trade? If so, annotate it on your trading diary. The technical indicator that you were using gave you an exit signal, and you ignored it? Well, don’t be ashamed. Write it on your trading diary, and learn from your mistakes.  

All traders make mistakes. The difference between winners and losers is that winners tend to learn from those mistakes. Losers prefer to forget about them… 

If you want to be a winner, you’ll need to build a great trading diary and make it as much detailed as you can. You can even take some chart snapshots at the moment you entered and exited the trade and post them on your trading diary so that, in the future, you can see the reasons why you made your decision about a trade. 

In the future you can read your trading diary and learn about some mistakes that you made. This will allow you to correct these mistakes on your future trades.

How Can I Start Making Money on Forex? (part 1)

Educate Yourself:

If you’re just starting on Forex, you need to read everything you can about it. Start by reading free ebooks like this one and check some top Forex courses on the market. Think about your education as an investment on yourself, not as an expense. Some people argue that you can learn everything about Forex for free. Well, it’s possible, but I seriously doubt anyone can become a good trader without investing in his education.

This is true for everything in life, so how could it be different on Forex? Can you imagine a doctor performing a surgery if he has not invested in his education?

The same happens in Forex. Forex is a business and as a business it needs time and investment on your part. If you don’t treat it as a business you won’t be able to earn money on it.

There’s no holy grail out there that can make you money effortlessly but there are some courses and systems that can give you all the knowledge you need to succeed. Some good products that can give you good knowledge on Forex are Super Forex System, Forex Killer, Forex Supreme System, 241Forex, Forex Trading Strategy and Combo Fib Special. You can check the resources section at the end of this ebook to find more good options for you.

The only good education that comes for free is the experience. This is a value resource and since all Forex brokers offer you a demo account for free, you can gain experience without risking any money.

Plan How You Will Trade:

You need to decide how you would like to trade. Would you like to day trade? Would you like to swing trade? It all depends on your personality and on the time you have to trade. There’s no such thing as the best trading style. The best trading style is simply the one that best suits your personality. If your personality is more suitable for day trading, you probably won’t be a bright swing trader. If you prefer less stress and/or you don’t have the time to stay in front of your screen all day, you will probably be better swing trading.

Best Hours to Trade Forex

Since the Forex market is open 24 hours a day, a trader can’t track every single movement on the market. It’s crucial for a trader to know when he can expect high volatility, so that he can implement his strategy on the most effective way. If you’re trading using daily charts, the best period to analyze Forex is around 5pm EST because that’s the rollover period.

If you’re trading on shorter time frames, you must know when you can expect more volatility.

The most important Sessions on Forex are:

The Asian Session (7pm – 4am EST) – During this period, you can successfully day trade especially if you trade the yen. USD/JPY is a good choice if you plan to trade on this session. This period is not as volatile as the US session or the European session, but it’s possible to trade it and achieve a good performance;

The European Session (2am – 12pm EST) – This is one of the best periods to trade Forex. Since most of the dealing desks of large banks are located in London, the majority of major Forex transactions are completed during this session. During this period you can implement a successfully strategy on any currency pair.

The U.S. Session (8am – 5pm EST) – This is another great period to implement your forex strategies. Volatility is good, and you can expect good volatility on any currency pair.

The European and U.S sessions are the most important ones on Forex, so you can trade between 2am and 5 pm EST and get good intraday swings almost every single day.

Between 8am and 12pm EST we have the U.S. session and the European session at the same time. This is the best time of the day to trade Forex. Volatility is good in all currency pairs. Some of the most important economic releases appear during this period, and this brings good opportunities for Forex traders almost every single day.

5 Myths about Forex Trading

1 – If I know how to trade stocks, I know how to make money on Forex:

If you have experience trading stocks and think you can simply apply your knowledge on Forex and make money, you’re going to be disappointed. The Forex market is much more complex. Firstly, the Forex market is open 24 hours a day. This may not seem a big deal but it’s a significant difference in relation to the stock market. As the Forex market is open 24 hours a day, this brings more complexity to a trader. If in the stock market you have periods of higher and lower volatility, in the Forex these differences are even higher.

Many stock traders think the Forex market is easy because it is open 24 hours a day. They think they can trade whenever they want and make their quick bucks. Truth is you can make money in Forex. But for that, you need to have a deep knowledge about this market.

The indicators that work in stocks don’t always work in Forex. The Forex market is more complex and, this way, the indicators that you use on stocks don’t work so well here.

Brokers are another huge difference between stocks and Forex. In the Forex market, due to the lack of regulation, a lot of Forex brokers don’t act in their clients’ best interest. It’s a lot more difficult to find a good Forex broker than a stock broker.

2 – Since the market is open 24 hours a day, you can make money anytime you want:

Once again, this is not true. In order to make money, a trader needs volatility. Although this market is open 24 hours a day, in the majority of the time there isn’t enough volatility to make good trades. This is a big challenge because volatility can appear at any time of the day and the trader can’t be watching the market all the time. He has to adjust his strategy in order to trade only in high volatility periods.

3 – Commission trades are free on Forex market: You don’t pay a commission fee when you place an order. 

Although, you pay the spread, which is the difference between the bid and the ask. This way, the more you trade, the harder it will be to make money in Forex because you’ll have higher fees. In the Forex market, as in any other market, a trader must avoid the overtrading at all costs.

4 – You need to predict what will happen in order to make money in forex:

In order to make money in Forex, you need to react to what is happening. This is not the same thing as predict. A good trader simply reacts to whatever the market is telling him. He analyses charts, reads the news and all information he has at his disposal in order to react as fast as possible to market movements. A good trader is always looking to evolve and learn.

5 – The more complicated my strategy, the best:

This is another myth that has nothing to do with reality on Forex trading. The truth is that usually the simple strategies or systems outperform the complicated ones. So, there’s no need to use plenty of different indicators at the same time. Study the market, find your favorite system or strategy, and stick with it.

Forex Advantages

The Foreign exchange market (also known as Forex, currency market or FX market) is, by far, the largest financial market in the world. It includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions.

The average daily trade in the global Forex and related markets is currently over US$ 3 trillion.

Lots of traders are starting to trade Forex due to the Forex market advantages. Here are the most important Forex market advantages: 1 – 24 hours a day market:

The Forex market is open 24 hours a day (except on weekends). So, no matter where you are based, you can trade Forex at your favorite time. 2 – High liquidity:

Forex market is the biggest financial market in the world averaging over 3 trillion USD daily.

3 – Leverage:

The leverage on Forex can be as high as 200:1 which means that you can trade up to $100K with just $500.

4 – Easy short selling:

On Forex it’s as easy to buy a currency pair as to short sell it. There’s no uptick rule like on Nasdaq.

5 – Free commission fees:

Commission fees are 0 on Forex. The only cost in buying a currency pair is the spread.

6 – Free trading platforms:

On Forex most brokers offer good trading platforms for free. 7 – Free Demo accounts:

Most Forex brokers offer free demo accounts which allow you to start practicing with virtual money. This way you can learn Forex without risking your money.