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How to Improve Your Odds in Forex Trading

Forex trading is a fairly safe investment vehicle. Until now real estate has always been considered as a very stable investment option, simply because they weren’t making more of it anymore. But look what has happened in recent times. Property prices have headed south and continue to be there. But this is not so in the currency market. There is always someone willing to buy or sell a position in the currency markets. It is this liquidity in forex markets that one has to take advantage of to make or book profits.

Frankly there is no roulette wheel of fortune operating in forex markets. To think so would be a fallacy. A retail forex trader has several basic options to choose from in carrying out forex trading. They are spot trading, forwards and futures, options and spread betting. Each has its own advantage and disadvantages. But we are not going into that for now.

Forex traders by and large stick with spot trading. That is where the majority of the individual forex brokers trade most of the time. Spot trading simply means exchanging one currency for another without much of a time interval. The traders first choose the currency pair to trade in and then determine the entry and exit points. How do they do that? They base their decisions on news releases and fundamental analysis or use technical analysis which means analyzing performance charts and tracking price movements.

Forex scalpers use fundamental analysis to anticipate price movements in the short term. In such cases they don’t hold on to a position for more than a day or two and perhaps may even liquidate position in a couple of hours. But the flipside is,heavily leveraged positions could reach stop/loss points quickly and losses could mount quickly. So this is considered a dangerous trading strategy.

Some traders use technical analysis and capitalize upon trends using mostly Moving Average as a favored technical indicator. The advantage with Moving Average is that, it helps smooth out the erratic nature of lines caused by daily highs and lows as it is refreshed daily with most recent day added and oldest entry dropped.
Simple and exponential Moving Averages are used to identify trends.

In some forex technical trading strategies resistance and support levels are identified as entry and exit points. The key is to find the strategy that suits you the best and then try to improve your odds.

But if you want to improve your odds you must bear in mind the following.

  1. Never over trade. That is because overtrading increases the odds of your loosing more money. Why is that? You could no doubt make big profits, but the fact remains due to the highly leveraged nature of the accounts you could loose big too. So over trading is a double edged sword.
  2. It would be a wise idea to trust the forex charts. After having your strategy in place, set your exit points and let it carry on from there. But make it a point to study the charts at the end of the day. Then again stick to your strategy. As a matter of fact, charts should indeed chart out your strategy.
  3. Have patience. Having patience is not only a rare virtue but a most important one in forex trading. You must have patience in the sense that you must allow your strategy to do the talking. That is the importance of patience in forex trading.
  4. Finally test your forex investment strategy on a continual basis. Fine tune it if the occasion demands. A few losses here or there will not make much of a difference. But consistent losses call for a reworked strategy. In any case, prudent updating of your forex investment strategy from time to time would always be a good idea.
  5. Remember no forex strategy or plan could ever be one hundred percent accurate. You should accept it as a fact. Nevertheless by and large, you could take it that forex strategies that reckon with technical analysis and using stop/loss points with every order are generally considered the best in view of their success rate. But this is just a point of view. It is not a hard and fast rule.

The points listed above will greatly help you in your trading activity if interpreted correctly.
Apart from the points listed above, you should know how to handle the psychological barriers that affect every trader decision. If you know that and take the right decisions it will put the odds in your favor.

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