3 Approaches For a New Trader in the Forex Market
The forex markets are absolutely huge. Every day approximately 3 trillion U.S. Dollars are traded around the world, most of this is speculative money. I am quite sure that most of the people, I mean the average traders, are never able to really get ahead with their trading accounts. There are so many questions to answer: Which time frame should I watch? Is the 5 minute chart superior to the 30 minute chart? Where should I place my stops? How much risk should I take on each trade? What about Money Management! What kind of a money management approach should I implement? WOW! Those are a lot of questions.
The desire to earn some extra money on the side can be very compelling. A new forex trader will realize pretty quickly that he needs a strategy, a business approach that will work. What the industry has done is spawn the growth of EA's. These Electronic Assistants are for sale all over the internet. Also known as "Robots" they purport to automatically analyze, assess and then go ahead and make the trade for you; all on its own. I really have no idea how many EA's are on the market, it probably numbers in the thousands. Here is the interesting part. Almost all of them will provide a track record. Generally, most of their results are based on "back-testing." The most glaring problem with relying on back-testing results is that the trading parameters are adjusted, tweaked and retrofitted to show "Great Returns."
Unfortunately, the results usually are not replicated when "forward-tested." EA's sell for anywhere from $50-60 all the way up to a few thousand dollars. Are they worth it? Well, maybe there are some reliable ones. It seems to me that with fixed rules, an EA would do just fine if the markets activity in current time is similar to the activity observed during the extensive back-testing. If the markets activity is now strongly trading up, down or sideways, whatever is different from past testing, then the new results will be less than stellar. Sure, I know that there are EA's claiming to be nimble and capable of self-adjusting to a changing market environment...perhaps.
My experience has shown me that the best approach is to find a successful manager who is immersed in the forex markets, and thoroughly understands how to place trades that are profitable. There are active traders who are skilled enough to regularly show a 90% plus success rate on a forward going basis. Some of these experts charge a reasonable monthly fee, others will take a piece of the spread on each given trade.
In summary, let me say that the desire of most people entering the forex markets is to make some extra money. Is that correct? Sure it is. Does it matter to your ego if it is not you personally who "thoroughly" understands the intricate workings of forex trading? It should not. What's important is that you understand or have access to someone who understands how to successfully and profitably trade.
I believe this approach will allow you to make extra money on a regular basis.
About the Author:
The author currently is attempting to earn $100,000 in forex trading over the next 2 years. Follow his progress here: http://100thousanddollarforex.blogspot.com/
