What is Forex Trading? Pt. 2
Automated Forex trading – A way to make an automated income!
A lot of professional and home Forex traders are using automated trading systems to generate profits for them. These so-called robots are pre-programmed trading systems that open and close trades based on a set of factors that comprise a mechanical trading system. Instead of a human to do it, since it’s mechanical, the system can be executed perfectly by a machine instead.
The use of automated systems is on a steady rise, especially for extreme short-term trading. The market can move very rapidly during volatile hours and a computer program can make much better use of those situations than a human trader ever could.
Those who have cracked the code and discovered a profitable robot can basically make money while they sleep because the automated software will trade for them on its own. However, most trading robots don’t last for long periods of time and they will usually have inconsistent periods of profitability and unprofitability making difficult to rely on them completely.
The fact is, finding or building a profitable trading robot is more difficult than it may sound at first. The unpredictable and complex nature of the Forex market makes it extremely hard for any computer to automatically beat the odds consistently in the long. It usually takes occasional human intervention even for a great automated trading system to adjust for the evolving nature of the market in order to keep the robotic system on the profitable path.
Risks in Forex trading
The risks associated with Forex trading should never be underestimated because they are real and serious! Any complacency at any time by anyone who trades the Forex market will be easily punished by the market in most situations, and in some cases, it may result in the trader losing his entire investment!
Regulators are very strict on this matter. The first thing that every Forex broker must comply with, or anyone offering Forex services, is to put a big risk warning on their website and the client agreement. Basically, whenever you decide to trade Forex you must agree that you accept the risk of losing everything before they will let you to open an account.
And indeed, you should be prepared for that, even if you intend to be well-disciplined and run it as a serious business. Aside from the usual risks that come with trading financial markets, in Forex there is an additional peril – leverage.
Leveraged trading is much riskier compared to unleveraged investment options. For starters, there is the risk of losing more than the initial investment which of course can not happen without leverage.
Leverage works for you when you are right as much as it works against you when you are wrong. It’s really a very serious double edged sword! It can be used correctly to steadily grow one’s investment over time, but it must be done so carefully. On the other hand, any careless large leveraged bets are destined to be punished sooner rather than later.
Before you can make money with Forex trading it’s very important to spend enough time to understand all the risks that are involved and also what protective steps and measures you can take to lower the risks when you are trading with leverage. Forex trading is a highly-leveraged financial product and that should make us that much more careful when trading it.
Key to success in Forex trading
Knowledge and skills are certainly important in order to be profitable in Forex trading. Although there are a lot of services that will offer trading signals with which you can basically trade without knowing anything about the market, it still helps if you at least understand the basics of how Forex trading works and why certain things happen the way they do. Building the sufficient knowledge and skills takes the longest to achieve of all the pillars needed to succeed in Forex. Luckily being an expert is not required.
Discipline is also a huge thing. Emotions have no place in a successful Forex trading plan and over the long run, rigid discipline is bound to bring success. Traders must have a trading plan if they are determined to be profitable and it must be traded in a highly disciplined manner.
To tie it all together, full-time Forex trading will require a balanced lifestyle which should include regular periods of breaks from the charts. Trading psychology is a very important part of the success puzzle and taking the time to relax can play a huge part. Trading under stress is unlikely to prove successful or profitable as it usually leads to making irrational and emotional decisions.
Is Forex trading for you?
Many diverse personalities can succeed in Forex trading and even raise it to a level of a consistent source of income. Basically, there is a way for pretty much any personality type to make in Forex.
However, the endeavors ought to be bumpy. Some get it sooner than others but still, it’s no easy task.
Whether Forex trading is for you or not will depend on a lot of factors when it comes to trading it yourself.
Usually, like in any business or professional field, making money is not enough for someone to be motivated to stick with it for years. In fact, there are many easier ways to make a lot of money so not everyone will find Forex trading to be his or her cup of tea.
However, Forex trading does not necessarily have to be something that you will do for years. For instance, the Forex market offers many short-term opportunities and there are many ways for people who don’t understand it to make money.
Doing it yourself is the hard way, but it’s not necessarily the best way. Aside from signal providing and trade recommendation services, you can even have other traders, professionals trade your account and make money for you.
At the end, we can say that we are all part of the global Forex market whether we want it or not. So, for anyone interested in investing and growing their capital, the Forex market is definitely an option they should consider and there will certainly be a way for them to profit in one way or another.