Seven Steps In Forex Trading

Here are seven steps that every forex trader should consider when managing a foreign exchange account:

1. Maximize Your ToolsForex Capital Management provides effective on line tools to help make you a more effective currency trader. This includes free market news and real time charts. Perhaps the single most helpful tool is the FX Demo Account, which enables you to test strategies and learn from the process without risking your cash.

2. Risk Management Every successful trader needs answers to key questions in order to be able to set an acceptable level of risk. How much will the market move? Where should I take my profits? How much am I willing to lose? Where should my stop and limit orders be placed? Forex Capital Management can help you to make the right decisions to manage your risk.

3. Two Ways to Trade What kind of trader are you – fundamental or technical? The fundamental analyst studies the underlying causes of relative movements in price. The technical analyst studies the historic movement of actual prices. Forex Capital Management supports all kinds of traders.

4. Basics for Technical Analysis Sound trading decisions start with trend analysis tools. What is a market trend? How do you classify the different kinds of trends, and how do you plot trends over time? How do you identify price support levels, and how do you find price resistance points? What role do retracements play in your strategy? Forex Capital management helps you to gain a basic understanding of technical analysis.

5. Applying Technical Analysis Charts are available at intervals that are appropriate for the length of the position you intend to hold. Five-, fifteen- and sixty-minute intervals help if you are planning on trading in a few hours. One, four and twenty-four hour intervals are appropriate if you plan on holding the position for a couple of days. Longer-term intervals provide data to support trading decisions based on long term trends.

6. Fundamentals that Every Trader Should Know Supply and demand drives the price of currencies. Interest rates and the overall strength of an economy are two primary factors that influence exchange rates. Indicators such as Gross Domestic Product, foreign investment rates, and the balance of trade reflect the overall health of an economy, and can be responsible for shifts in the demand for that particular currency. A tremendous amount of data is available at regular intervals - statistics related to interest rates and international trade always receive the closest scrutiny.

7. Psychology of Trading The biggest enemy to most traders is not the market, but themselves. Cut your losses early and let your profits run. Always trade based on objective analysis. And always remember that leverage is a double-edged sword - be sure to never bet the mortgage.