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Forex Trading

Starting in Forex TradingMaking the decision to start trading currencies is a big step, especially if you’ve never traded before. In this instance, there is a lot you will need to know before you start taking serious steps. If you have traded before, you will find that there are some similarities between Forex trading and other types of trading—especially when it comes to reading charts. However, Forex trading is a very different type of endeavor. You will find that analysis methods will be different when it comes to doing what works. Starting with a clear mind is going to be your best bet when it comes to trading the different currencies, at least until you have mastered the most basic skills.

Forex trading is a great next step for binary options traders especially. However, you want to be careful. With binary options, you only have to be right by a single pip to realize a profit when dealing with currencies, but with Forex trading, you need to be more accurate. A trade that’s up by a single pip will lose you money because of the spread. Instead of hoping for small gains, you want to see the biggest gains possible. In other words, rather than playing small ball, you want to hit homeruns if you can. Forex trading is at its best when you make only a few trades per day, but those trades see big gains for you.

If you’ve traded binary options in the past, trading in other marketplaces is not a big transition. Many of the same skills apply. You still need to know which direction the currency will move in, you can decide whether to trade on the up or down side of a trade, and you still want to trade only the very best trades. As with binary options, quality is more important than quantity.

Let’s look at some of the basics when it comes to transitioning to Forex trading.

Where To Start?

If you’re new to trading in the Forex market, you will definitely want to start with a practice account. Called demo trading, practicing trading with fake money is the best way to learn. You’ve probably heard about learning by doing, and this is exactly what demo trading is. You are able to make real time trades and see how they turn out, all while not taking on the amount of risk that you would if you were actually using real money. Demo trading is a great way to learn because you will actually get to observe real life market behavior and figure out which strategies work and which ones do not.

Forex Demo AccountsDemo trading is going to be a good place to start, but eventually you will want to make the transition to trading with real money. There are a few pieces of advice to consider here. First, you will want to demo trade for as long as possible. Many brokers will allow you to demo trade for a couple weeks before closing your demo account. This is a great place to start, but a couple weeks just isn’t enough time for some people. If you need extra time—and most of us do—it’s okay to bounce around from broker to broker. It’s your money that you will ultimately be risking, and you need to take the proper steps to protect yourself. Don’t feel like you are being forced to start trading before you are ready. Demo trade long enough to figure out what works for you and gain some confidence. You will need these things if you are going to succeed here.

Secondly, you want to start out small. Maybe you will be trading full size lots later on, but there’s no shame in starting out with the smallest units you can find. Also, avoid using excessive leverage at first. Start small and work your way up. Even if you’re going to be trading with millions of dollars eventually, start as small as you can so you can get a sense of what you are up against and learn how to check your emotions at the door before you start risking a lot of your hard earned money.

Selecting Your Broker

Different brokers have different features. Maybe you want access to lesser known currencies, like those in developing nations. You will need a different broker in this instance than if you were just going to trade the Euro and the U.S. dollar with a low spread. That brings up another point. There are many different brokers out there, all saying that they are the best one out there. Do your research and make sure that the broker you are going with has tiny spreads. The same broker won’t always be the best one in this respect, but you want to make sure that your final broker has a consistently low spread, regardless of which currency pairs you will ultimately be trading.

A secondary concern here is to make sure you are familiar and comfortable with the software you will be using. Demo trading can help you to learn the software quite easily—this is yet another reason to open a demo account. If you don’t like the interface that you’re going to be using and you have problems, you might lose out on good trades or you might leave a trade open too long and lose money. Obviously this is something that you will want to avoid as much as possible. Many of the Forex Brokers use the Metatrader platform, but a lot do carry some kind of proprietary charting package as well.

Refining Technique

There’s no one universal trading technique that works for everyone. If you are looking for this type of silver bullet, you will be very disappointed. Finding the techniques that work for you requires a few things. First and foremost, you want to make sure you are comfortable with it. A trade that puts too much at risk or uses too much leverage for your personal tastes might have the potential to make you a lot of money, but if you are feeling squeamish, you are more likely to pour your emotions into the trade and this can leave you susceptible to making mistakes. Emotions are not a part of a successful trader’s technique. The moment you start getting excited, or greedy, or nervous, your emotions cloud your decision making abilities and leave you prone to mistakes. You want to remain attentive, but emotionally distant. Currency trading is a purely intellectual task.

Happy Forex TraderThe only way to tell if something is going to work for you is to practice it over and over again until there is enough statistical evidence to show you that you can make consistent money. Anyone can get lucky for a single trade, or even a dozen trades in a row. This does not equal long term success. You want a technique that is going to make you money over hundreds of trades and over the course of many months. Don’t rely on luck, but rather skill.

Binary Option Strategies Converted

For those of us who have started trading in binary options, you might be reluctant to start trading in the pure Forex marketplace because you are unsure of how to strategize. Luckily, the process of switching over from one to the other is pretty simple, especially if you have stuck to mainly currencies with your binary options trading.

First, you want to look at the things that worked for you in binary trading. Did you analyze both currencies in the pair you were trading? Or did you simply look at the price charts and trade off of the price action? If you were thorough and analyzed each currency and related them to each other, you are in luck. The only difference is that now that you are trading straight Forex, you will need to have a higher degree of certainty over the trade. Suppose your trade moves in the right direction, but only a few pips over the course of three hours. This is a long time for many people to have their money tied up in a single trade, and thanks to the gap created by the spread, this trade looks like it will be a losing one.
Trading Price Action is Critical
Rather than trying to squeeze out a tiny change, target the trades that look like they will be a big mover. Price action trading is effective in binary options, and it will work just as well in Forex trading.

There are no strict time limits in Forex trading. With binary options, you could know in as little as 60 seconds whether or not you were profitable, but you don’t need to submit to this in Forex trading. If you aren’t seeing a lot of movement, there’s nothing saying that you can’t keep the trade open longer. Just beware of margin calls by only trading with a small fraction of your trading capital and you will be all right in this regard.

Summary

Forex trading is different when you are no longer trading binary options, but it can be equally profitable—or even more so. Just make sure you have a good technique and don’t fall into the bad habits that many traders learn in binary options trading and then think that they will work trading currencies in the traditional sense.

Risk Disclaimer