Forex Blog: Currency Trading News & Analysis.

March 6th 2007

Mistakes to avoid when trading forex

The majority of this blog’s content is focused around events which potentially impact forex markets, paying scant attention to the trading, itself. I would like to offer a quick primer to those of you who are new to forex trading and simultaneously a refresher to those who consider themselves veteran traders. First, when trading currencies, it is important to develop a consistent, cohesive strategy, and stick to it. Success and profits are most likely to be earned by honing a single strategy, such as interest-rate arbitrage, changes in geopolitics, or technical analysis, to name a few. It is most worthwhile to approach trading from one particular framework, and practice discipline in adhering to a corresponding strategy by working towards understanding if/how the markets move within that framework.

Next, think twice about short-term trading. Those most likely to profit from day-trading currencies probably have more capital, more leverage, and access to better information. It is difficult to compete with these investors, and it makes more sense to stake out a position over the course of weeks or months, than minutes or hours. Finally, establish a risk/reward profile that you wish to target, and work to understand how volatility, which is a readily obtainable statistic, bears on this schema. If, for example, the markets suddenly become volatile (as is currently the case), it probably doesn’t make sense to set up stops (which automatically execute trades to minimize losses) since prices may move rapidly back and forth through the price points that you set, locking in losses.

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Posted by Adam Kritzer | in Investing & Trading | No Comments »

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© 2004 - 2024 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.