Automated Forex trading online has increased dramatically over the last several years as trading programs, fast computers and high speed internet have become more available. Unfortunately many new traders start with inadequate knowledge about Forex trading and therefore tend to lose money and give Forex trading a bad name. Many people make lots of money trading Forex online and there are a few key points new traders should be aware of for success. These are important whether you use an automated Forex trading system or not.
1: Charts. Reading and understanding charts while trading Forex is important, especially if you do not use an automated Forex system. You should understand the basics of chart plotting. This plotting should include multiple time frames and various key indicators, e.g. resistance and support. The automated Forex system you use will dictate the types of charts and indicators you use and therefore the types of indicators you need to understand.
2: Trade Set Up: Your automated Forex trading system will determine the individual trade setups and should have specific rules to follow. Online Trading However, you have to make the final decision, if not using a fully automated Forex trading system. Therefore you need to know the setup rules and execute the trade. You should be able to watch the charts and see that a trade is setting up even before a Forex trading signal has been produced. This is an area many traders tend to overlook. This can be a very costly mistake.
3: Entry Points. If you are using an automated Forex trading system, entry points should be part of the trade rules of the system you are using. However, you should know where the entry points are likely to be before the Forex signal is produced. Entry points are just price levels that, based on your trade rules, have a high probability of trade success. However, if you miss the entry your chance of a profitable, lower risk trade decreases sharply. There is an old saying: “better never than late.”
4: Stop Loss And Take Profit. You should know your stop and profit levels even before you place the trade. Why? If the potential profit is not adequate compared to the potential loss you may not want to place the trade. Typically you may have multiple profit levels and evaluate the trade as it approaches each level. Good money management dictates that you have solid profit and loss levels to protect your money. If you have a Forex system that does not emphasize these key levels then move to a system that does have these components.
Good online Forex trading systems will indicate where the stop and profit targets should be located. In a fully automated Forex trading systems these levels should be programmed into the system. In an automated system you may have to determine these levels based on trade rules. If you are trading for larger profits, instead of scalping, then a trailing stop is important to protect profits. Specific rules should be used to place trailing stops.