Everyone who understands the prospects of the international currency market constantly searches for the methods how to quickly earn much money on Forex. It is quite naturally as trading activity brings large income and there are a lot of real stories of awesome growth. However if one looks at the statistical data one will see that the situation is quite disappointing as most new comers leave the market with nothing.
The statistics is very dull especially if one takes into consideration the fact that earning money on Forex quickly is quite possible. However, at first you should bring up your own character and stick to some basic pieces of advice. These recommendations are often ignored by many traders, but they will be very useful both for the new comers and for the experienced traders who continue to make mistakes and cannot reach the stable level of earnings.
The Forex’s nature is chaos. This view can be supported by any professional trader. In his day famous Bill Williams invented the theory of Chaos referring to the currency market. This theory helps have a proper view on the market. Thus, before you earn much money on Forex you should learn certain rules in theory as in practice such lessons cause a lot of pain and spiritual torments.
You should remember:
* Market is a place where something unpredictable can always happen;
* No trading strategy is absolutely stable and profitable.
That is why before every transaction is made you should check if it has a profit potential being several times larger than a loss. You should accurately define where the exit will be if the situation becomes unfavourable. Many traders consider that they are ready to accept the loss. However, if they see the growing minus they usually start doing just the contrary: replacing the stop-loss hoping for the turnaround, averaging and increasing dangerously large volumes and so on.
It is very important to remember that you should never require the price to move in a certain way. It is influenced by many market factors. Thus, the trader should accept it by closing the red ink transaction if it develops despite the predetermined scenario. It is much better to take small loss and think over the situation coldly than to start doing something wrong and to lose all the money in one transaction.
One of the most important trading aspects is a control of one’s spirits. Without it one won’t be able to earn much money on Forex quickly. Usually trading cuts one to the heart and a person abandons himself to it spending all his free time in front of the monitor. As a result, most traders “burn out” without having achieved any success.
Trading on Forex should surely be conducted with breaks even in case of scalping. One should not look at graphs for 6-10 hours by any means. New comers often practice it thinking that in this case they will learn Forex trading faster. One can spend maximum 2-3 hours for trading without breaks. After that one should switch to something else otherwise exhaustion and nervous breakdown will become the “best friends”. The given approach will help keep the clear perception and significantly increase chances of making profitable transactions.
Before earning money on Forex one should study a lot of information about financial markets. Right at the given moment traders come across the notion of diversification that is allocation of funds in different assets. This approach is surely very useful for large investors, but not for common traders.
Warren Buffett said: “You’d better work with one asset and study it thoroughly”. Thus, no diversification as it will just cause scatteration of the attention and bigger nervous tension while controlling several transactions at the same time.
Those who are looking for the possibility to earn money on Forex quickly usually ignore rules of the capital management. They hold that the risk in one transaction must not exceed 1-2% of the deposit amount and profit potential within one trading operation must exceed the permissible loss twofold at least.
This simple recommendations increase the traders “survivance” many times over. At the same disregard of the money management and risky increase of the working volumes in order to get large profit from 1 or 2 transactions will inevitably lead to failure.
Albert Einstein said that complex interest is one of the most significant inventions of the 20th century. It means that the profit of 10% per month on the initial deposit of 2000 USD will give much more than the simple interest of 120% or 2400 USD per year. As the amount earned per month is reinvested it means that the following 10% will be calculated for the bigger amount. Thus, 2000 USD with 10% per month will make net profit of 4276 US dollars and 85 cents.
That is why don’t be in a hurry to earn all the money right here, right now. Imagine that just 50% of annual interest on the 2000 USD deposit will make 100 000 USD in 10 years! So, a good trader always looks at the stability of the income. It can be not very high; however it will make quite big profit in the end.