Monday, March 30, 2009

Currency Trading – Success Depends On One Critical Factor

Currency trading success depends on several factors but they all stem from one specific factor – If you don’t have it, you will probably join the 95% of losers.

It’s a common error made by novice traders, so let’s look at it:

You need confidence in the method you use.

This requires some more explanation.

It’s a fact that most traders don’t have ultimate confidence in their method because they do the following:

They try and buy a method from someone else and don’t understand the logic it is based upon. Because they don’t fully understand the logic, they fail to follow it through losing periods and throw in the towel.

If you want to succeed in Forex Trading you need to follow a method with rigid discipline, through inevitable losing periods.

If you don’t, you don’t have a method in the first place!

Furthermore most systems sold are junk.

There sold by writers, or failed brokers and simply don’t work.

These people rely on hypothetical track records and the greed of buyers, to make them think they will win, but of course they don’t.

So how do you get confidence in the method you use?

1. If you are buying a system

Only look for a track record in real time of 2 – 3 years duration – this proves that the logic of the system is soundly based.

By looking for a real time track record you can get rid of 95% or more of FOREX trading systems that are sold.

2. Understand the logic

However, even with a FOREX trading system that has worked in the past you still need to have confidence in it and that means understanding why it in depth, so you have confidence.

You also need to be happy with the drawdowns it incurs some traders can take for example 50% drawdowns - others can’t.

Look at the worst peak to valley drawdown and time to recovery.

Make sure your happy with it and that you can follow your system through drawdowns of similar magnitude.

3. The best way to achieve currency trading success is to:

Devise your own FOREX trading method.

While this may sound daunting, it’s easy to do.

You can build the system and test it and as it’s yours you will have total confidence and the discipline to follow it when the going gets tough.

Building a system is easy, if you do a little research and we have in our other articles shown you how to do this.

Many people think they can trade FOREX and have no real drawdown, but that’s not real life.

Drawdowns are emotionally and financially draining and confidence gives you the discipline to stick with your system.

by: kelly price

Check Out the Related Article : Make Money with Online Trading

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