Forex trading is seen by many as either too hard, or a game that you just can’t win at. After all, the figures show that about only 18% of traders are profitable. So why even bother with it? Well, in reality, trading forex is actually quite easy. I spent many years studying different strategies, and approaches to trading, and the one thing that stood out was the fact that everyone is trying to find an indicator that will tell you when to buy and when to sell.
The fact of the matter is, there is no such indicator, and never will be, otherwise everyone trading would be rich, as an indicator like this wouldn’t stay under wraps for long.
You may not even know what forex trading is. I will explain in a few sentences what is entails. Basically, you are buying and selling currency in order to make a profit when price fluctuates. Generally, you can use leverage, so you may buy Euros, then sell them when the value goes up, and make a profit. You buy one currency against the other, i.e. EUR/USD.
Read up more here about what forex trading is and how it works.
So, how do I make money forex trading?
When most people begin trading forex, they jump right into the 5 minute charts, hoping to make a fortune over night, their dreams are quickly crushed after they blow their account. 5 minute charts are full of noise, and are very hard to trade, I used to trade 5 minute charts, and was profitable, but, it wasn’t easy, and I would prefer to trade higher timeframes, as there is less noise, and price is easy to see. You might think it will take forever to build up an account trading on higher time frames, but really, it doesn’t, I can make 10% a week trading 1hour+ time frames. Trade 14 or 15 pairs, and that will give you a trade a day on average.
It has taken me many years, and countless late nights, but I have come to the conclusion that no indicators on my chart is the best approach. It lets me see price clearly, without being lit up like a Christmas tree.
The strategy I use is based on 1 moving average, the 20EMA, and H4 and Daily charts. I trade 16 pairs, and get around 3-10 trades per week, each winning trade gaining me 2.5%+ and risking no more than 1% of my account on each trade.
To understand my strategy, you must first understand price action, I will explain this in my post, What is Price Action – Forex. Price action is pretty simple to understand, and there are a number of patterns you must be able to identify in order to trade using my strategy. Again, these will be covered in my other forex related posts.
Well, considering I have a profitable strategy, why not? When I first started trading forex, I was wanting to make millions, but quickly realised that was not going to happen. I now focus on long term growth of my account and the power of compound interest.
With my trading account slowly building, I can make use of this money when I retire, or withdraw part of it, and put it into an investment with a higher return if that time ever comes. I haven’t come to the stage where it can replace my income with my trading profits, but hopefully some day, I will be able to. Trading forex is also part of my plan to build multiple streams of income.
Again, remember, I have just started taking investing seriously, so every small gain will end up being a big gain someday.