When you first consider the forex market for investing, you can come across many frightening statistics. Some experts put the failure rate for FX investors at 95% – not very good odds!
You may also have heard of people making large sums of money in just a few hours of trading. It may begin to seem as though success in this market has to do with factors beyond your control, when nothing could be further from the truth.
There are a multitude of experts and websites promising success with the latest system. With so much information you may be left wondering how to trade the forex market successfully. By understanding that success or failure lies within the mind-set of the individual investor, you can better position yourself to profit from the market.
The key to success in the forex is to develop a system that works for your time frame, investment style and risk tolerance. By implementing a strategy and sticking with it you can banish fear and greed (the major psychological hindrance to success), and realize success in the forex market.
Often, when investing in the forex, your success will depend as much on what you don’t do as it does on what you actually do. This means that knowing when to stay out of the market can be as important as when to enter it.
How To Trade Forex Successfully In A Choppy Market
The majority of people who lose money in the stock market do so because currency trading is not trending all the time. A volatile market can be the number one factor in forex failure due to the fact that the market may appear to be at the start of a trend, when in reality it is a false movement in price.
FX trading signals may communicate a correct move in direction of a currency’s price for a moment, only to turn against you the next minute and hit your stop-loss. Learn to surmount false moves in the market to assure the status of your account.
You need to train your eyes to figure out if the forex charts are trending. If the market is not trending, and your experience in currency trading is limited, it is recommended that you avoid the foreign exchange market until it gets trendy.
One way to tell if the market is choppy is by reviewing the candlestick charts. If the price is down for two candlesticks and up for two, the FX chart is said to be choppy.
Another way to tell if the market is choppy besides looking at charts is by using FX indicators such as MACD and stochastic. This is an easy strategy that you can implement that can give you a better perspective on where the market is going.
You can also check a higher time-frame to assist you in judging the market. For example, if you are trading utilizing a 1 hour time frame you can switch to a 4 hour time frame to see if the stochastic is pointing down or up.
By checking the longer time frame, you can better position yourself to trade in the direction of the long term trend, and not fall victim to choppiness and volatility in the market. While these suggestions will help you spot real trends in the market, it is advised to avoid choppy markets altogether, as there are not enough opportunities for you to realize a profit.