Stopping Yourself on Forex
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Finance > Currency Trading
Apr 18, 2007
Stopping Yourself on Forex
The global foreign exchange market is the largest, most active market in the world. Trading in the forex markets takes place nearly round the clock with over $1 trillion changing hands every day. It is the main event. The benefits of forex over currency futures trading are considerable. The dissimilarities between the two instruments range from philosophical realities such as the history of each, their target audience, and their relevance in the modern forex markets, to more tangible issues such as transactions fees, margin requirements, access to liquidity, ease of use and the technical and educational support offered by providers of each service. Over the years I have trained many traders and I always advise that they spend at least three months paper trading before they go live with real money. Now even though I advise this I have never had a student actually do it. They all give up on paper trading after a few weeks and go live. Why is that? They become impatient, they think they have mastered it or they think they don't need that much time. There is a good argument for not paper trading first as no matter how much paper trading you do you will never get the emotional involvement that you have when you have a real live trade on. The fact remains however that you need time to familiarize yourself with whatever system you are using. Finding out you don't know how to operate your dealing system or you don't know the correct terminology to use when speaking with your broker on the phone when trading live is a recipe for disaster. You need time to get used to how to operate your system. Whichever system you use you must know it inside and out. This is part of trading. It is one of your main tools and should be taken seriously. I read on a bulletin board a traders comment that on his first outing trading the E-Mini S&P 500 he lost on each of his trades. He noted though, that had he had a wider stop each of his trades would have been profitable and that therefore he would be trading with a wider stop in future. A wider stop on these particular trades may have worked, but this does not mean that a wider stop per se is the answer. In fact, everyday there is the possibility of any given trade going into profit if given enough room, but that does not a wise strategy make. This trader was a seller in a market that subsequently went down; hence he could see that had he given his position a bit more room he would have made a handsome profit. Unless this trader has
Martin Chandra is a full-time investor. He has been researching investment strategies and make his own living. For more information please go to here.
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