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Why Do Investors Want To Trade Forex?

Trade Forex

Deciding to trade forex can come from any number of considerations, but it probably originates from the realisation that forex represents the last capital market on Earth that routinely permits almost anyone to trade an investment position with 1%, or less, cash down. This allows the creation of almost unparalleled profits. Another factor, particularly for former stock or futures traders, is the intellectual challenge of going up against some of the best bank and hedge fund traders in the world – and, winning. On the other hand, for some cosmopolitan types, the global nature of forex is very appealing and the fact that it allows tremendous asset class diversification is a wonderful freebie.
Learning to trade forex successful takes some work. You have to know a lot about banking, economics, technical analysis, charting and the mechanics of using a trading platform. Using a “demo account” to speed up this process should be considered. “Demos” provide a risk-free environment in which you can perfect your forex trading skills.

Why Investors Decide To Trade Forex

A decision to trade forex probably evolves from any one of 3 impulses. First, for a person with a traditional investment portfolio (of stocks, bonds and/or real estate), forex represents the ultimate in diversification. It’s global and has no direct correlation with any other asset class. Or, a decision to trade forex could come from the sheer boredom of dealing regulatory, trading and taxation hassles of trading stocks and bonds. Then, again, the high degree of leverage that most forex accounts appear to have is very alluring. No other capital market allows almost any adult with as little as $250 to trade forex with leverage ratios in excess of 100:1. A combination of these reasons might also be at work.

What Gains To Expect If You Trade Forex

Many beginners make the mistake of thinking in terms of absolute numbers (e. g., “I want to make a million dollars this year.”). Expert traders never think like this. They hold themselves against a far higher standard: the average weekly (or monthly) profit that they have made versus the average weekly (or monthly) loss they have made, net of all trade-related fees (but not taxes). If you view life as a war against losing any money and then, if you can, making a profit, it changes your focus. You’re constantly trading defensively and your ego has no grounds for inflating ideas of grandeur. This reduces the chance of making an error and should increase your chances of making a profit.

How Investors Trade Forex And Make A Return

Forex is a “zero sum game” (i. e., “the winner takes all”). This means that you should stick to practising on a demo account until you can make a profit on 6 out of 10 trades. If nothing else pops into your head, try working off of a 4-hour chart of either the EUR/AUD or AUD/USD chart, using a “Williams Alligator” and a very low leverage ratio (i. e., 30:1 or less). The “Alligator” is a combination of 3 “smoothed” moving averages. When the shortest one crosses over all of the other ones, it’s a signal to launch a trade in the direction of the crossover. Stay in the trade until the shortest average crosses back over all the other lines.

 

 

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