A Killer Forex Strategy: Three Ways to Turn Yourself Into a Profitable Forex Trading Machine

There are a small number of 'amateur' foreign exchange traders who keep a very low profile, but live a fantastic lifestyle. They travel the world as they wish, taking holiday after holiday, spending time with their loved ones, and funding it all from a continuous succession of profitable forex trades.

Sadly, for most people, it's really not that easy.

Here's a frightening fact: nearly 50% of foreign exchange traders lose money to the point where they have to stop trading altogether, and go and do something less risky instead.

If you're trading currencies right now, or you're thinking about starting, then you have a 1-in-2 chance of losing your trading pot.

They're not very good odds, are they?

I've been trading currencies for over twenty years, on and off, and mostly without great success. When I heard that nearly half of all traders lose their money in the forex markets, I seriously considered giving up myself!

The one thing that kept me going through the dark days was the knowledge that the foreign exchange trading software that is available now to the individual trader for modest sums, or even for free, are better than the software that professional City forex firms were paying thousands a year for only a decade ago.

I reckoned that the quality of the trading software tools available to us would continue to go up over time, and prices would continue to come down. And one day, we'd have access to some of the best foreign exchange software at silly prices!

I believe that day has now dawned.

As 'amateur' forex traders, we now have the choice of three directions to take that will allow us to play with the "Big Boys" - and win.

Option 1 - Pay For Trade SignalsThere are plenty of companies and 'expert' individuals out there who will deliver trade signals to you by phone, SMS or email. I've used a couple of them myself, and they can be pretty good.

Just so we're all clear, trade signals basically come from the market. They are either fundamental (good farm payroll numbers, an interest rate change and so on) or they are technical, from patterns forming on the charts, or a combination of the two.

There are literally hundreds of different signals to choose from, and a service should pass on to you only those they think have the highest probability of creating a profit. By the time you get a trade signal, though, it will simply tell you the currency pair, whether it's a Buy or a Sell, and some idea of stop-loss and profit-take levels.

The problem in this system lies in the information being delivered at the right time, and you being on hand to act upon it. The other problem is cost - some of the better ones will charge you several hundred dollars a month for their service. Of course, this adds to the pressure on your trading account, as you have to make the cost of the FX signal service back before you start to make any money for yourself.

5 Forex Trading Myths

1 – If I trade stocks successfully, I will make money in Forex

Despite the fact you are successful in the stock market, this does not imply that you’ll be successful in the Forex market. There are a lot of differences between the stock market and the Forex market. First of all, the Forex market is open 24 hours a day. This requires a lot more complexity and work. As you know, you cannot be in front of your computer 24 hours a day. You’ll have to figure out the best time periods to trade so that you can be successful. Also, you need volatility. And here’s another problem with the Forex market. There are periods of very high volatility and very low volatility. This difference is much higher in this market than on stocks. You may think that as the Forex market is open 24 hours a day, you can day trade whenever you want. You just need to turn on your computer and there it is… a trade just for you. Well, that’s not even close to the reality. This may happen from time to time but it’s not frequent. You need to develop a good strategy. The last point I need to focus is a real important one. If you want to trade Forex you need to find a good forex broker. Well, this isn’t a simple task as in the stock market because this market is not regulated. This means that there are a lot of brokers that don’t act in the best interest of their clients. Be ready to spend quite some time finding a solid broker that fits your needs.

2 – If the Forex market is open 24 hours a day, I can make a profit whenever I want

Well, not quite… As you know, to make a trade, a trader needs volatility. The volatility can appear anywhere within the 24 hours. As you cannot be in front of your computer all the time, this makes your work harder. First of all, you need to figure out the best time to trade (where volatility usually appears) and you also need to adjust your strategy to this period.

3 – I don’t have to pay commissions in the Forex market

You don’t have to pay commissions but you have to pay the spread. The spread is the difference between the bid and the ask of the currency pair you want to trade. Sometimes, these fees are not so cheap. If you plan to be day trading, you’ll see a major part of your profits to be left for the broker.

4 – In order to be profitable in the Forex market, I need to predict what will happen

As Forex is a complex market, you need to constantly learn and evolve as a trader. This does not mean you have to predict; this means you have to react and react fast. As a trader, you need to access charts but also need to access to all the information you can. The more information you have, the better your response will be when something, good or bad, happens in the market.

5 – I’ll be more successful if I use a more complex strategy

This is clearly a myth. Simple things work better in life as well in Forex. If when you’re defining your strategy you use 3 indicators, I bet most of the times there will be one that goes against the others. Try do define a good but also a simple strategy.

Forex Traders - Your Psychological Makeup

Your individual psychological makeup will make the single biggest impact on your trading results. It’s not enough to understand the market; you’ll also need to understand yourself as a trader.

Aggressive Or Non-Aggressive?

Take some time to figure out whether you are an aggressive or non-aggressive trader. If you are a naturally non-aggressive trader, an aggressive trading system will never feel right to you and will most likely cause you lots of stress and frustration. As you can see, choosing the right system according to your psychological makeup is crucial for increasing your trading productivity.

There are many ways to trade the market. Be patient and choose the right approach for you.

How Much Technical Information?

Another aspect of your psychological makeup is the amount of technical information that you’re comfortable with handling. The ability to stick to a trading system may be lost if you feel overwhelmed by too much technical indicators and information. You’ll thus need to determine exactly how much or little market or technical information is enough for your own comfort.

To do this, ask yourself what benefit you’ll get from an additional piece of technical information. Will this information help you to better time your trades or improve your trade winning probabilities? If not, then don’t waste your time. Don’t let superficial information clutter your thoughts and distract you from the important trading decisions that you’ll have to make.

Keep your information tools clean, clear and concise.

Environment

This is one aspect which many retail traders ignore. You’ll need to determine just how much or little environmental stimuli is need to maintain your top mental trading performance. Some traders like having sights and sounds around them while others prefer quieter, tranquil surroundings. Having the right environmental surroundings can substantially help improve your mental alertness and well-being when trading.