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Many believe that the markets today require the same skills as they did 30 years ago – but today’s markets are much harder to trade.
This may surprise you, but the markets have changed and it is now harder to trade – but if you know why, you can increase your profits significantly.
If you haven’t yet figured out why online currency trading makes it harder to make money, then you need to know – because you can make huge profits at the expense of other traders.
The Internet Has Increased Volatility
Online currency trading has brought all the trading tools that were once reserved for institutional investors into the hands of any trader with an Internet connection.
This means that traders anywhere in the world can get all the news in a split second – just 30 years ago this was not the case. Information flowed more slowly then – which meant volatility was lower and trends were softer – making it easier to catch and follow trends.
Online currency trading has now made this much more difficult.
Today, volatility is higher than ever and pullbacks are more severe – causing traders major problems when trying to stay in a trend without getting stopped.
A Common Problem
Today, all traders are acting at the same time – which increases volatility.
Example:
The market moves quickly in the perceived direction and then pulls back (stopping traders) – the market then resumes – but many traders get stopped and get frustrated – while the trend continues the way they thought it would – but instead of making thousands of dollars in profit, they get stopped out at a loss.
Does this sound familiar to you? – All traders face this problem.
So how can we trade more effectively with these changes in online currency trading?
Here are some tips to help you gain an edge over other traders:
1. Stay power
Since you are more likely to be stopped out on reactions, you need stamina – that’s why options are an ideal tool – if they are used correctly.
Make sure you only use “in the money” and “at the money” options to increase your chances of success.
2. Don’t Predict!
Don’t try to predict market movements – wait for confirmation.
The best way to take advantage of a move is to use a breakout method that will confirm the move – you should already have your orders set to take advantage of when you reach the specified levels.
3. Trade for the Long Term
One thing that doesn’t change is that currency trends last long – months or years. These are the trends you need to milk for serious profits.
Forget day trading with high volatility levels and the impact of commission – all you will do is loose.
4. Don’t worry about Pullbacks when you are in a Trend
Today, pullbacks can be severe – and nobody likes to lose in the short term. Don’t be fooled, if the longer trend is up – stick to the trend.
Don’t chase stops to close – allow for volatility, you need to buy in the short term to win in the long term.
Some traders, when trading currencies online, are so obsessed with protecting their losses that they never follow a long-term trend.
5. Trade Infrequently
Don’t trade often – be patient.
Trade only the big moves and make sure you hold them.
Remember that big trends last for months or years – and these are the ones to milk for maximum profit.
Forget the commonly used phrase: “I might miss a move if I’m not in the market” – you won’t miss if you focus selectively on trades.
6. Money Management
Don’t fall into the trap that you should only risk 5% on a trade – this is a figure often quoted by many authorities on trading.
On a $10,000 trade, that’s only $500.00 – if that’s all you risk, you have a good chance of losing or being stopped out.
Use 10 – 30% on trades that look good and dare to trade if you believe in it.
Volatility is higher than ever – but so is an opportunity if you know how to deal with it.
By following the advice above, you can make huge profits from online currency trading.
Good luck!
