When trading currencies you are initially on a mechanical bull, chaotic, disorientating and likely to throw you off. Foreign exchange trading volume is more than six million U.S. dollars daily, surpassing the volume of the stock exchanges. Major pairs are the most active, as are spreads, which are tight, with EUR/USD, GBP/USD and USD/JPY all being examples. Exotic pairs are the ones that are volatile and difficult to trade, and will attract the newbie to enter trades that they cannot get out for good. Stay in majors for a minimum of 12 months without blowing an account.Do not remove from majors until after 12 months without a blow. Many successful traders continue reading to strengthen their understanding of FX Currency Trading trends.
Profit and pain in this space is determined by pip movements. The typical pip size for most trading pairs is 0.0001 or one one-thousandth of a unit, and when multiplied by leverage, won’t amount to much. A standard lot is the base currency 100,000, so that every pip change represents 10 bucks. Mini lots are 1/10th that of the above. Micro lots make it even more reduced. In this school, losses are expensive and it’s probably best to get in on the ground floor and trade at a very micro level. The purpose of life is not to make money, it is to make money.
There are no changes to human psychology, hence the repetition of chart patterns. Head and shoulders pattern, double tops, ascending triangles do not herald any oracles, but are only a visualization of the collective behavior. As long as support levels are holding they continue to hold, as soon as they do not, they do not. Resistance zones will crack when applied to a force over a long period of time. Often times, breakout traders go astray in the lead up to the actual breakout. Experts wait for signals to come in, rather than grasping any that might happen. But that’s not the case here; it’s a place where patience prevails over impulse, where you might feel like you have to do something at all times.
Economic calendars take the place of an iron fist in controlling the volatility in the short-term. The non-farm payrolls release is like a snow globe and hits the dollar! The ECB’s statements have an instant impact on euro crosses. The economy is doing well according to flash data from the PMI for manufacturing. A significant news event may cause your price to move beyond your stop loss and you may lose money, and feel bad about it. For many professionals, they just go out of the way 30 minutes prior to major announcement times, because during those times, predicting becomes a game.
Risk management is no pretty girl, but it’s what makes the difference between a professional and casualties strewn across this battlefield. Never invest more than 2% of your investment at a time in any one deal. The magic of growth over time is compound growth, but you must make sure that your base is protected to get the magic.