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Forex Trading and the Holy Grail

Aug 17, 2007
If you've ever looked into 'forex' (foreign exchange) trading, you will have a good idea of the potential gains. You can become wealthy in a very short space of time, although it pays to remember that one person's gain is another person's loss. Remember the warning 'prices can go down as well as up'.

There are a number of brokers or spread betting companies through which you can trade. I'm going to give you some advice on maximising your chances of succeeding. You will face challenges along the way but if you persevere for long enough you may find yourself in a very positive situation. First and foremost, know what you are getting into. Read as much as you can about every aspect of trading, and remain objective with regards to the many opinions you will hear on how to go about it.

If you are spread betting then you will need to find a company that offers a competitive 'spread'. Shop around. Find out what a spread is - this is very important. Be very sceptical about trading systems that offer instant wealth. Trading methods that worked last year may have run out of steam in the current market.

Once a system becomes widespread enough then too many people know how it works. Lots of people start using it and any advantage is wiped out. You may end up slaving away for little or no profit at all.

There is one system that can potentially make you rich. It's called 'your system'. That's right. The one you developed and didn't tell anybody about. This can take a good deal of work to develop. There are numerous software packages available to help you monitor market patterns, and design your killer strategy. If you develop a strategy that works then keep it quiet!

In my experience the most consistently profitable trading technique is a method called 'skimming'. This involves placing many trades for small market movements which build your profits based on a considerable number of transactions. It's only possible for spread betters to profit from this if they are able to place bets with a tiny spread. This requires experience and a good knowledge of the markets. Make sure you are fully prepared. This is an intensive method - you didn't expect it to be easy did you?

I have one final recommendation which is extremely important. You may be raring to go but if you remember just this advice you will save yourself considerable amount of stress. The most important advice you will ever hear about trading is- 'only trade with money that you can afford to lose'.

'Is that all' you may ask. Talk to those who have lost the money they traded which they could not afford to lose. Beware anyone who suggests otherwise as they very probably have something to gain from your additional risk-taking. They don't care if you crash and burn, as long as they get their slice. If you are planning to win in the long term then limit your exposure to losses in the short term.
About the Author
Richard Barker co-publishes the Hammock Survival Guide. To learn more about forex trading visit http://www.hammocksurvivalguide.com/ in particular the 'Currency Trading' category. Feel free to reproduce any article as long as the author's resource box remains intact.
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