Apart From money management, having a good Forex Trading Plan is probably the most significant factors of successful trading. Most people jump into Forex trading searching for fast money and an adrenalin rush. The Fact Is That, these fast money seekers are misled by quick success that causes a form of cockiness. If they're truly unfortunate, their early forays into the Forex market are profitable, so they in turn start out trading bigger amounts of money, and then BAM! the forex market takes them for everything they've got. They're just left wondering: What happened? This type of misfortune often hits beginners who try to day trade wthout using solid plan, and this especially wounds those lost souls who try to scalp the market without any real notion of what they're doing. Unfortunately, forex trading is really a zero sum game: Somebody must lose money for another individual to make money, and unfortunately it's first time traders just like you who're the losers. This article will explain why you must use a solid Forex Trading Plan to survive the zero sum game of Forex.
What is your Forex Strategy? Are you simply guessing and making decisions on the fly OR do you have a system that lets you know when you should make trades? Discretionary trading just isn't fit for new forex traders simply because you may not have experience or knowledge to make trading decisions on the fly. Even experienced forex traders avoid discretionary trading since they understand how difficult it is to make sound decisions in the heat of the battles. The big investment banks that provide the majority of the liquidity in the Forex market, trade using automated computer tested trading strategies, yet newbies believe they can trade without a Forex Trading Strategy! On the fly trading results to a lot of emotional decisions, which typically lose money. Practices like putting stop orders, closing out orders and adding on to a position shouldn't be done when you're in a trade -- These kind of decisions must be formed well before you even initiatea trade. What do you do when a trade starts to go against you? Some unskilled traders have no idea how to proceed; all of their answers and on the fly decisions are based on both fear or greed. Yes, indeed!
The proper way to trade Forex: The proper way to trade Forex is to know beforehand -- where you will place your stop loss, where you will take your profits, how much money you will risk, and why you are jumping into each trade. Newbies like the thrill of making these vital choices on the fly, so they eventually go bust. The simple truth is that the majority of traders lose money trading Forex, but you don't have to be one of the losers. Invest in some Forex education, and learn to really make a solid Forex Plan, so that you can avoid many of the mistakes that new Forex traders make.