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Why Succeeding in the FOREX Market is So Challenging

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Forex market is one of the vibrant markets in the world and also one of the most challenging. Trading in currencies is a risky affair and not all investors can suit this market. If you are considering plunging into this market you need to possess the necessary skills to enable you trade successfully or be willing to master the art of trading in the Forex market. Before we delve into the reasons why succeeding in the Forex market is a daunting task, let us have a sneak preview of the Forex market.

1. The daily operations of the Forex Market are equivalent to $ 3.9 trillion

2. The market is highly liquid as a result of huge trading volumes

3. The market is geographically dispersed

4. Operates around the clock save for the weekends

5. There is an array of factors that affect currency exchange rates

6. Individuals from all facets of life can trade in the Forex market as long as they have what it takes to trade in currencies

Making money in the Forex market is challenging and risky but can be done. In Forex market to make substantial profits, you buy a particular currency at a low value and then wait for it to appreciate so that you can sell it at a higher value. The risky part is when you buy that currency and instead of the value appreciating, it depreciates. This means that you are going to lose the money you had invested instead of earning returns on your investment.

 

Why people fail in the Forex Market

Lack of Proper Planning

 

There is a common saying that failing to plan is planning to fail. This holds water in the Forex market because if you fail to plan your trading properly then your chances of succeeding are minimal. To avoid losses stop to hastily dive into Forex trading without proper planning. Take time and prepare and plan adequately for what lies ahead in the market before investing your time and money in the market.

Poor Money and Risk Management

 

Proper money and risk management is crucial to succeed in the highly volatile Forex market. Currency rates can swing in one direction in a moment and in the next moment they are swinging in another direction. Therefore, poor money and risk management will see you lose a lot of money in the market. It is of paramount importance that you limit your downside by using stop-loss points always and as well trade only when good trading opportunities arise.

 

Other ways you can mitigate risks while trading in currencies is by utilizing a number of different indicators, placing stop-loss points at the closest resistance levels as well as utilizing trailing stop losses to lock in profits as well as limiting losses when the trade turns favorable. When you master the art of money and risk management you will significantly increase the rate of succeeding in the Forex market.

Failure to Identify the Entry and Exit Points Properly

 

Things that you should know as a trader when you are looking for entry points:

When the market is Bullish then;

1. Trend lines should breakout upwards

2. RSI, MACD and Stochastic should have positive divergences

3. Strong (close support and weak) distant resistance

4. Bullish candlestick engulfing

When the market is Bearish then;

1. Trend lines should breakout downwards

2. RSI, MACD and Stochastic should have negative divergences

3. Strong (close resistance and weak) distant support

4. Bearish candlestick engulfing

 

It is a great idea to place exit points, take profits and stop losses, before placing your trade. The exit points should be located at strategic levels and should only be modified if there is major change in the market that will affect your trade. Some of the strategic levels where you can place exit points are; just before areas of strong support or resistance, just inside key trend lines or at key retracement levels.

 

Though Forex trading is challenging if you perfect some of the things discussed above you can make good returns at the end of the day. You also need to exercise patience and ice-cold discipline while trading. Remember, Rome was not built in a day and you also need time to trade profitably in the Forex market.

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Though Forex trading is challenging, Learning, researching, reading and understanding the basics and, later on, the depth of Forex trading, will boost your authority status and increase your success rate.

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Excellent post covering the main points of FOREX.

 

Should also add that the geographical dispersion means that local politics of all the countries in the world can also have a huge impact on trading. For most people, it is very difficult to keep track (and to understand the consequences) of events happening halfway across the globe.

 

Unlike stocks (which are usually local companies/multinationals), FOREX requires a lot more research and a lot more awareness of political events.

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Jenny, FOREX requires a lot more research and a lot more awareness of political events...this entails fundamental analysis which is also an integral part of Forex trading

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