• Tuesday, 16 June 2009 22:23
• Last Updated Tuesday, 16 June 2009 22:30
• Written by Desmond Wira

Forex trading is indeed a risky business. You can become rich quick or you can be a poor guy in a minute. That's why Forex trading demands a careful strategy. In this article, I will share some of my strategies. I am not forex trader expert. Sometimes I loss too. But I have strategies that may help you to win in forex trading. And these strategies works for me. I use Marketiva as a trading platform, but I think these strategies also works well in other platform.

The forex trading strategy I described below is based on CUAN Trading Strategy. Read this article to read more

(C) CONTROL

Manage Your Risk
Like I said earlier Forex is risky. Every successful trader should know how much risk he is willing to take, able to minimize the risk. This is the basis of every realistic trading strategy. Always do a risk management.

1. The most important for you to begin trading is know your tools. Varius forex brokers offers different tools. Be sure to test any virtual money or demo accounts offered and use the opportunity to learn the tool. Where to click and so on. Don't risk your money by clicking tools you don't know.
2. Forex is basically a margin trading. Use no more than 5% of your margin. Less is better. For example, if you have $100, then use only $5 to trade.
3. Always enter a stop-loss. This will prevent you from getting huge loss. I personally do not enter exit target, because I monitor from time to time, but define stop-loss is a must. And don't ever change or remove stop-loss you entered previously. Click here to learn more about defining stop loss and exit target using Support and Resistance.
   
   

Manage Your Money
Beside risk management, you should use Money Management. Why should you? Without money management, you will trade carelessly. And that will help to lose money faster.

1. After you familiar with your trading platform. It's time to use real money for trading. I suggest that you use small amount of money first. Do not use all of your money from your saving account just because you always win in virtual trading. When you are using real money you will be a different person.
2. After you win consistently, you may add a little more money step by step. Remember, only if you can win consistently. If not, refine your strategy fisrt before throwing more money
3. Do not throw all of your margin trading in one single position. You can use average down strategy to minimize loss and maximize profit.
4. If you win big, withdraw some little money and put in your saving account. It's your prize, earn some. Don't waste all your prize in another trading.

Consider Your Trading Style
Are you a long term investor, short term trader, day trader, or even scalper? Answer this before you begin trading. Because this will determine your trading style. For example, this will determine which time frame you should use. Scalper usually use 5 min chart. Day trader use 15 min chart. Short term trader use hourly or 4-hour chart. Meanwhile long term investor use daily or weekly even monthly chart.

(U) UNBIASED

The biggest enemy to most traders is not the market, but themselves. You must mster trading psychology to win. For me, forex trading is 1% skill and 98% psychology. Two common problem that most trader encounter are fear and greed. Fear will prevent trader to get optimum profit, because he leave the market too early. Meanwhile, greed make trader put position in already too high or too low. Greed also can make trader put more and more position in trading until the trader uses too much margin. Here are tips for you:

1. Patience. You can make more optimum profit if you're just wait a little longer. Stick to your exit target.
2. Do not overtrading. Opening too many position over and over again is dangerous. You are human, you need rest, and prime dondition to win in market
3. Do not try to get revenge. Maybe you loss. It's normal. You cannot always win. Just don't try to recover the loss in hurry. You may tempted to use bigge margin to recover loss quickly. Yes, you may get lucky, but if not you'll loss more and this time huge loss.
4. Do not think to get rich in forex quick. Focus on steady profit. Small profit but consistent is better. I consider only taking 50-100 pips a day. With 5% margin I use I can obtain 30-50% per month. That's a good thing
5. Take a break. After winning, take a break. Afte you loss several times take abreak. Maybe you need to cool down. Begin another day.
6. Here's one trick to help you not fear, greed or overtradding. After you placed a position, define stop-loss and exit target, close your trading platform. Open again after some time. If you are stick to hourly chart, then you can open platform again after 3-6 hours.

(A) ANALYZE

There are two types of traders, technical and fundamental. Both have a radically different approach to making trading decisions. It's up to you to choose from. If you are fundamental trader, you'll rely heavily to information, understand economy, interest rates and so on. If you are technical trader, you'll rely heavily to knowledge to read chart. I consider myself as a technical one in forex trading. For me, reading a chart is a fun way to make money in forex. The purpose of reading chart is to determine three things:

• when to entry
• what position should you take, long (buy) or short (short).
• when to exit

I am not tech savvy trader. I only use simple indicator in technical analysis. I use only Moving Averages (MA) and Moving Average Convergence Divergence (MACD). Believe me, trading should be simple. This two indicator is more than enough if you know how to use them well.

Read here to learn how to determine entry and exit strategy using MA
Read here to learn how to determine entry and exit strategy using MACD

(N) NIMBLE

Business and financial world is very dinamyc. It's always changing. You have to keep your eyes open. Market can change dramatically at anytime. Losing or wining in trading is affected by market timing.

1. Remember when is the best time to trade. I notice that there are certain time that my internet connection is not good, overloaded, and the speed is dropped. I don't trade between that time. If I do, I am just going to get on my nerves and affecting the way I trade.
2. Enter the market only if you are certain where the market is heading. Think and analyze before you act. If you are uncertain about the market, just wait a little longer until you have strong indicator.