Using common sense in Forex trading can go along way toward your Forex trading success. Let’s look at a few tips that can help you along the way as you navigate the sometimes confusing world of Forex trading.
First of all realized that the market will only do one of three things. It will go up. It will go down. It will go sideways. That’s it in a nutshell, in reality it really is not more complicated than that. So now that we know the market will do one of three things how exactly can we use this information to help us profit in the foreign exchange markets?
What we want to do in order to profit in the Forex market is to correctly anticipate the future direction of the market. Notice the use of the word anticipate rather than predict. Anyone who thinks that they can predict the future direction of the Forex market is, in reality, simply anticipating that the market will move in a certain direction.
One of the best things about anticipating future market direction is that we don’t have to be right every single time in order for us to trade profitably. This may come as a shock to many people because they have seen so many commercially available Forex trading systems claiming to have ridiculously high percentages of winning trades. Beginning Forex traders have seen this so much, in fact, that they believe it is normal for Forex trading systems to have a winning trade ratio of 95% or greater.
In Forex trading you can have a winning trade percentage of as low as 50% and still trade with good profit. The key thing to remember is that in trading you wish to build equity. To build equity the sum total of your winners must be greater than the sum total of your losers regardless of the percentage of winning trades that you have. This is part of the simple common sense type of Forex knowledge that many beginners miss.
One of the most common sense things you can do in order to be a successful Forex trader is to not make currency trading more complicated than it has to be. Once you find a Forex trading strategy that works well stick with that strategy and don’t allow yourself to be distracted from building long-term profits.