Becoming a successful Forex trader needs the mastery of different concepts and techniques to allow a good chance of winning more in the market. Aside from the knowledge about trading, you also need to protect your trading funds and promote the right mindset and psychological trading approach. Learning all these things will greatly increase your understanding of Forex trading.

Mind, Money, and Method in Forex Trading

To be able to become a profitable trader, you need to develop a trading strategy that’s proven effective for some time. But the trading strategy cannot be properly put to action if the trader does not know and control the trading risk. In this case, the trader must have a well-established money management strategy to complement their trading strategy.

However, the last recipe to success also holds great power. Despite having the best trading strategy and a comprehensive money management technique, it will all go to waste if you cannot control your emotions and stick to your trading plan. In the end, you won’t be successful if you get overpowered with emotions.

Mind – The Trading Psychology

The movement in the market also affects the mindset of the trader – the trader’s psychology. A sound mind, away from unnecessary emotions when trading is, unfortunately, the most neglected aspect of trading as most traders are focusing more on creating their trading strategy and money management techniques. They fail to develop the right psychology of a successful trader.

One very important thing to do to control your emotions when trading is to be aware of them and avoid biases that greatly affect your trading decision. The truth is biases and emotions both don’t have a place in the Forex market. It does not just affect your trading decision but your analytical skills as well. To overcome these things, the first step you should do is to recognize them and overcome the emotions totally.

Method – The Trading Plan

As mentioned above, a system that you can follow in times of doubt is very helpful, especially for new traders. A trading plan is your key to success but most importantly, you also have to stick to it every step of the way. A comprehensive trading plan must contain the steps that you will partake throughout the trade and the market analysis that you will use to point out the right entry and exit points. Your trading plan must also contain the trading capital that you can allocate to open positions in the market.

Money – The Risk and Money Management

No matter how expert you are, there is no chance for you to create a trading plan that is 100% profitable and will not incur losses. After all, losses are part of your journey in Forex trading. In this case, you need to have a money management plan that will minimize the risk while maximizing the profits. When building a system that will handle the risks in the market, you must consider the risk and rewards of every trade. Consider the right position sizing, diversification, execution, and entry and exit strategies.

Whenever you trade forex, you have probably heard or have seen symbols like pp (ex. 1000pp); this is a pip or short for “percentage in point” or “price interest point.” When trading currencies, you’ll see this a lot, and without understanding what it is, it can be intimidating or discouraging for novice forex traders to do forex trading. This article will explain the fundamentals of Pip (“percentage in point” or “price interest point.”).

What is Pip?

Pip is the smallest amount an exchange rate can move per unit of currency in a given market. Pip can exchange rates for delivering accurate and valuable information to investors in real-time, without relying on guesswork or manual mathematical processing. Rather than relying on thousands of individual agents to convert local currencies into USD, Pip uses automated algorithms based upon data collected from multiple sources to provide a consistently reliable estimate of the current worth of a specific asset.

In the Forex market, there are two types of pip numbers: “Real-Time”, which indicates the last known par value, and “Historical”, which is the average of the last three reported prices. The historical figure is usually more reliable as it has been updated more often with trades taking place during that period. While traders should treat any real-time information with great caution, historical data is usually more trustworthy as it has been compiled from reliable sources.

A brief history of Pip:

The price of a futures contract has an upward trendline (i.e. prices move within a band that represents expectations for future prices) and a bottom (i.e. prices fall below expectations for future prices). Bonds are often denoted by letter grades between A and F, with A being the highest and lowest. Pip has been used since 1971 by CME Group, and it’s still used today for pricing early in the trading day.

Pip is a fundamental tool used by traders to measure and eventually influence different currencies’ price action. As of March 2018, Pip has been independently implemented in over 1,000 other trading systems across 150 countries.

How does Pip work?

Pips are a unit of measurement for the fluctuation of an exchange rate. The Forex and Futures Markets employ pips as a handy unit of measure to signify interest rates in various currencies, as well as capital or index values. It shows how much the price of one currency varies as the price of another currency changes. Also, keep in mind that a pip is the smallest unit in which a currency’s forex price is transacted. It simply displays how much the price has risen or fallen. This indicates that one Pip should impact the price of a pair of currencies by two times if you trade currencies.

For example, If the Euro drops to 1/10th of its current value against the Dollar, investors will lose ten pips. If the Dollar gains to 1/10th of its current value against the Euro, investors will gain 10 pips. The market trades between two different prices at any given time. The selling price is what someone would be willing to pay, and the buying price is what someone would be willing to sell it for. When the two prices are close enough (close enough for trading to occur), then buyers and sellers meet in the market and trade.

When you trade forex, the price of a pip indicates how strongly the exchange rate is valued in foreign currency. The weaker the Dollar, the more selling pressure there will be on any given pair of currencies. As the dollar strengthens, it creates upward pressure on the prices of non-U.S. currencies as well. That’s why it’s often advised that traders avoid purchasing currencies that are heavily backed by the greenback. Instead, purchase shares of companies with strong currencies such as the Brazilian Real and South African Rand.

There is a long-standing rule in Forex trading – the 90/90/90 rule. According to this rule, 90% of traders will lose 90% of their funds in a matter of 90 days.

But for those well-educated traders, there is nothing much to worry about. You can keep yourself from joining the 90% of the losing end by knowing the myths in trade forex that have been recognized as real all these years.

Myth No. 1: Trading is a Piece of Cake

We tend to see those adverts claiming that trading is easy and you can become a millionaire after investing some money. There are also videos, posts, and even seminars made by people who claim that they are the living-proof that trading is easy.

Unfortunately, these things are only made up of people who want to sell something. These are their dirty tactics to encourage you to invest as soon as possible, even without proper education and knowledge. They might offer you something, such as software or a training course then they claim that this will make you successful instantly. Then you know what happens when you become successful in trading. You will make lots of money.

So, without a doubt, many people get to jump straight to success, avoiding the regular learning process of trading. But then, after giving them the payment, you realize that you have fallen into a huge scam.

Trading Forex Lets You Make A Lot of Money

It is true that you can make a lot of money in trading but all that stuff claiming that there is an easy way is a complete myth. In fact, it is very hard to attain success in trading. First of all, you need to do a lot of things such as learning the basics of trading, the right behavior that you need while trading, and the trading psychology that goes with it. All these things cannot be achieved overnight.

Myth No. 2: Trading is a Get-Rich-Quick Scheme

Without a doubt, trading can bring forth large profits. But this advantage is only applicable to those traders who have the right set of knowledge and skills.

• You must learn and know-how trading actually works
• You must learn about probabilities in your trading
• You need to have a concrete trading plan that defines your trade setup, your stop-loss order, your exit trade as well as your entry trade.

After that, you need to;

• Start trading your system using a small capital
• Have a concrete plan on how and when you should increase your trading size
• Have a plan on how and when you should decrease your trading size
• Expect when you should take the time to achieve bigger profits

So, basically, the path to success in trade forex is learning the things that you need to know and doing the things that you need to do so you can trade correctly. To say it short, you need to know what to expect in trading. Also, you need to know in advance the things that you should do when adverse scenarios come in.