How active a trader do you want to be?
To answer this question, you actually need to answer a few more questions. Among these questions are:
- How much time do you have to spend in front of your computer watching price action?
- How much pressure do you have to try to make up for a missing retirement or replace a lost income?
- What is your natural aptitude for risk-taking?
- What is your level of emotional and mental stamina?
Your trading will be more successful if you first spend some time thinking about your unique situation. Get very clear about why you want to trade, and just how active you want to be in the markets.
You should think of your trading like a business. Get clear about the risks, the rewards, the strategies, and the constraints before you put one dollar at risk. This means spending time thinking about and writing out your plan. Do your research and find a successful strategy you can copy. It’s been said that you don’t have to be the smartest kid in school if you can copy from the smartest kid. Why re-invent the wheel?
Once you have identified a strategy and market approach that fits your personality and the constraints imposed by life, take some time paper-trading it. Get comfortable with the tools you’ll use to do research and build confidence in your strategy before going live.
You certainly don’t want to “learn by doing” in the Forex market. On-the-job-training in the markets is like attending the most expensive school in the world whose colors are black and blue!
Here is a 1-minute chart of the EUR/USD showing an 8-period EMA:
It’s a fast-moving chart with changes in direction happening about every 13 minutes or so during the period shown here. When looking at this chart, think about your situation. Can you watch the markets this closely? Can you handle this many changes in direction over such a short period of time? Or maybe you want (or need) quicker action?
Trading currencies can be a great way to replace a lost income or catch up a retirement but it requires a great deal of effort on your part to become consistently successful. Part of this effort is simply to get clear about your WHY, the approach you feel most comfortable with and the constraints (time and money) you face.
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