Forex Trading For Beginners - Two Most Important Questions You Must Answer Before You Trade Forex

As a young graduate who was earning a good starting income many, many years back,I was attracted to trading stocks and shares as a traditional way of investing my hard earned money to try to create personal wealth. Since then, I often meet people who would tell me that right now, opportunities to make money from investing in the stocks and futures market, the forex and commodities markets are much lesser. To them, the golden years of investing are all but over.

But is this really so?

I have gone a long way since my beginning years as a novice trader and investor. Experience has taught me that the markets do not move in a straight line. The market by itself is what is termed " a sum of its parts'. For example, in the stock market, there are stocks that move in cycles that repeatedly manifest their movements in easily trackable cycles, and waves that we term "Elliot waves". Thus, we find a lot of traders utilizing a well known method of trading in the footsteps of the legendary trader WD Gann, who had an uncanny ability to discover the cycles of the market and to forecast the "squaring of time and price".

Experience has also taught me that there are stocks that are non-cyclical as well. So at any one time, there are many stocks and shares that are moving up or trending up, and there are stocks that are in various phases of trending down. Some stocks are cycling up, while others are cycling down and some just are trading within a tight range. With these various movements, there are open opportunities for a trader or investor to put his money into stocks and shares, commodities and forex at any time - because each trading vehicle displays its own price movements in its own particular way. This means, you can invest and trade the markets at any time, in season or out of season!

The second most common question that I encounter as a trader is this :" Just what would be a good way to trade the markets?"

Instead of jumping straight into methods of trading, what is important even before you ever start to learn to trade, is a personal evaluation of your own risk profile. You have to discover your tolerance for risk, which boils down to the amount of capital you are going to employ in your trades, and how much pain you are able to tolerate in the event the trade goes against you and you are in a drawdown, and when you will want to quit the trade in the light of the loss. If you are a conservative trader, then day trading is NOT for you and you may wish to look at long term position trading.

If you are an aggressive trader and like action, day trading and perhaps swing trading may be suitable. It is easy to be blinded by sheer greed at this time, because you can set yourself an unrealistic objective of making a million dollars in trading income when your capital is merely $10,000 and you do not have leverage such as a margin account.Such an objective will likely see you losing all your money because you will need to assume the highest risk....which will be unreasonable risk, and will ensure the rapid depletion of your capital.

Once you have sorted out your own risk profile and understand your self- your ability to take risk against the expectation of profits and gains, then you are poised to take the next step which is to discover the best trading method that is suited to your personal trading profile.

by:peter lim