Wednesday, July 7, 2010

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It's one thing if your strategy gets the direction wrong on occasions, but if your strategy cannot adapt to changing environments, you'll soon be among the traders who end up in the "forex graveyard." What do I mean by changing environments? Simply, it's the level of volatility in the market. This forex trading tutorial will guide you through how to select the right type of trading strategy for the right market. Just think- does it make sense to to find the "holy grail" of forex trading strategies only to realize it only works under certain market conditions? The market is an ever changing being that is super competitive for traders to win at (but potentially very profitable). If you want to make money trading forex you need to differentiate yourself from everyone else. Most people are trading the same strategy without paying attention to how the underlying market behavior is changing. If some strategy was tested during a period of calm, nice, trending markets, do you think it's going to fare well when a credit crisis develops and the market goes up and down 1,000 pips in a month due to widespread panic and indecision?

Don't be like the rest of the losers who just move from one forex trading strategy to another in an endless search for the holy grail, only to realize that had they came prepared with a set of strategies for dealing with different market environments they would've been able to make money trading forex during any period.You see, the reason why most people get stopped out is only PARTLY because they misjudge direction. It's mostly because they don't even have a clue that they have to judge the level of volatility. You got me? It's not just deciding whether to go long or short, it's knowing whether price is making large sustained moves, is confined to a range, or is making erratic swings, because different strategies are required in each case to capture profits and limit the probability of losing.

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