Forex eBooks, Articles and Tools | Profits from Forex

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1. Trading with a Plan

Every truly successful Forex trader will attest that staying in the game long term requires a cohesive and consistent plan of action for each trade. Of course short term profits will give the novice trader a false sense of success but without a methodical trading plan, dependable, reliable profits are not possible. The habits a successful Forex trader implements are developed through experience; the trader is not born with this knowledge. Successful Forex Traders have a specific plan of attack for each entry point, position size, stop-loss exit and take-profit exit.

Staying flexible and sensible, the veteran Forex trader will sometimes accept less if they judge that's all they can profitably take out of the current market. Other times, they extend their profit targets if market developments are swinging in their favor. One fact will set them apart from the novice to the Forex markets, and that's the fact that they never move their stop-loss orders from the original setting unless it's in favor of the position to lock in profits.

2. Anticipating Event Outcomes

Much as in chess, the successful Forex traders are thinking several moves ahead of their opponents, in this case assessing market conditions and determining a winning strategy. Looking ahead to extrapolate the impact of these conditions on market pricing, the successful Forex trader will anticipate how much the market has priced in an expected outcome. They will also consider the likely result if events match or fail to match expected outcomes. When those less prepared are still trying to assess conditions, checking charts and redrawing trend lines, the successful Forex trader already has a well charted course of action in place in is ready to trade.

3. Staying Flexible

Successful Forex traders remain unemotional in a volatile market, refusing to get emotionally attached to a specific position. Recognizing that it's not about being right or wrong, but about earning profits, they are remain focused on the goal. They also adapt their strategy to accommodate incoming news and information and quickly abandon an open position if events run counter to instead of waiting for a price action to take them out of their trade. That keen focus allows them to seize upon fresh opportunities that may develop in the market as they stay prepared to react. To remain primed they must keep a sufficient margin available for additional positions. They envision the major pairs so they can factor fresh news and information into their action plan. They may not be actively trading AUD/USD, but they still know the general climate and indicators influencing Oz.

4. Being Prepared for Trading

Successful Forex traders are always prepared. In a market that is open 24 hours a day and is subject to random events from all corners of the globe, the successful Forex trader must remain sharp and poised to strike. Some of the forces which move the Forex markets are:

• Upcoming economic data releases in the next week to two weeks: Know what the prior report indicated and what's forecast for the upcoming report.
• Scheduled speakers: Find out who's speaking (central bankers or finance official), what they've said in the past and they are likely to say this time.
• Central bank interest rate setting meetings and announcement times: Know when they're scheduled and what decision the market is expecting.
• Important gatherings of financial leaders, such as G7 meetings or gatherings of Eurozone finance ministers: Get a sense of whether currencies are on the agenda and what actions are expected.
• Liquidity conditions: Stay aware of time periods, such as end month, market closings or holidays and time of day (for example, European close, option expirations, International Monetary Market [IMM] futures close), when market liquidity may be affected.
• Unexpected events: Use rate alerts to stay on top of price movements outside expected ranges. Follow up on alerts to check for significant news and to assess potential trading opportunities.

5. Keeping Technically Alert

Successful Forex traders are aware of important technical levels in the currency pairs they're trading, even if they're not implementing a technology based strategy themselves. For instance, they know the key Fibonacci retracement levels, the location of various moving averages, they're aware of important short and long-term trend lines and recent major highs and lows. The successful trader may well be trading based on price behavior or momentum analysis, but will also keep abreast of technical levels as part of the overall strategy.

6. Going with the Flow/Trading the Range

Successful Forex traders are able to determine and assess the market, knowing if a market is likely to remain confined within parameters, or if it's trending. A seasoned veteran will go with the flow more often than against it in a trending market, and when short-term trends are high they look for levels to get long at and vice versa when the direction is down. At the same time, they're aware that trends pause and frequently correct, so they're also actively taking profit at key technical points in the progress of the overall trend.

If the environment favors trend trading, successful Forex traders are able to switch gears and stay on the edge, selling near the top of the range when everyone else is buying and buying near the bottom when others are selling. Just as important, when they're in range trading mode, they've defined an optimum point when the range is broken. If that point is hit, they throw in the towel without any remorse, possibly reversing direction and jumping on the new trend.

7. Focusing on Select Pairs

Many successful Forex traders focus on only one or two currency pairs for the majority of their trading. Doing so enables them to get a better feel for those markets in terms of price levels and price behavior. It also narrows the amount of information and data they need to monitor. Above all, they recognize that different currency pairs have different behavioral traits and they're able to adjust their trading tactics from one pair to the next. Focus on becoming familiar with just one or two major pairs before trying to broaden our and take on the whole market. Become an expert at assessing just one or two currency pairs and trade them with confidence, rather than spreading yourself too thin.

8. Protecting Profits

Successful traders take a profit regularly, whether it's a partial take-profit reducing the size of a winning trade, or squaring up completely and stepping back after a profitable market movement. Above all, when a trade is in the money, the successful Forex trader keeps what he's made and resists giving it up the chance of making a little more. If you don't take money off the table once in a while, the market will do it for You! “Bulls and bears each get a seat at the table, but pigs are slaughtered.”

9. Trading With Stop Losses

Even successful Forex traders lose money from time to time. What makes these veterans successful in the long run is that their losses are relatively small compared to their average winning trades. The key is to have a stop loss in place at all times to prevent an everyday losing trade from becoming an account killer. No one wants to lose money, but the best Forex traders are able to accept it as part of the cost of doing business. The only way the can regularly accept losses is by keeping them small and manageable in the first place. Master this habit and you're halfway there.

10. Watching Other Markets

The Successful Forex trader keeps an eye on other major financial markets as a matter of routine. Smart traders know that the primary markets they focus on are benchmark bond yields of the major currencies (US, German, UK and Japanese ten year government notes), oil, gold, and to a lesser degree, equities. On an intraday basis they look to these other markets for confirmation of short-term US dollar directional bias. For example, if the dollar is moving higher, US ten-year yields are rising and gold is falling. It's confirmation form other markets in favor of the dollars increase. If yields are flat or down and gold is higher, the dollar's move up may be only short lived. On a longer-term basis, Forex traders analyze those trends just as they do the currencies. Spend the extra money for charting services that include live rate feeds for those other markets.

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