Making Forex Trades

Making a forex trade is a simple process, but it's something that should be done with caution. Forex trading is all about managing risk and emotions. If you are making forex trades and you feel emotional, nervous, or any anxiety at all, you need to take a look at what you're doing.

Most traders that have issues with nerves have either lost money, they are trading with too much leverage, or both. If this is you, take a look at the basics of forex risk management and start doing things like setting reasonable stops and reducing your leverage. It will help tremendously.

The Mechanics of the Process
To make a forex trade, you'll need a forex broker. If you don't have one, see this list of forex brokers. Once you find a broker you'll need to open a forex trading account. A simple process, but it can take a few days to get everything squared away.

See also: Getting Started with Forex Trading

Once you have a forex trading account that is funded, you can prepare to start making forex trades. The first thing you'll need to decide is what you want to trade. A particularly liquid and well traded currency pair is the EUR/USD. It moves around 70 pips a day on average and is the currency pair of choice for many professional traders. If you think you might like to start with something that is typically slower, take a look at EUR/GBP. Slow might be boring, but it won't kill your account if you make a misstep.

Once you've decided on a currency pair to trade, open a chart and do your trading analysis. Which direction do you want to trade? You can make a long or short trade. You short a currency pair when you expect it to fall in value, and you buy it, or go long on it.

After you decide what you want to do, it's time to make your trade. Some brokers allow you to right click right on the chart and make your trade, while others have buttons that say buy or sell. Make your appropriate choice and prepare for a new screen to come up. Different brokers have various screens, but they all say generally the same type of thing. There is a field showing you the current price of the currency pair, a field for lot size(trade amount), one for a limit(close on profit), and one for a stop loss(close on loss). Some brokers have other options, but for the purpose of this tutorial we will keep it simple.

If you have a target in mind, set a limit order for the price you think your trade could potentially reach. Some traders prefer to trade and see what happens, and that's OK, but you should get in the habit of setting target prices. It tends to help you avoid making trades, just to make them. Equally important, you should set a stop loss. (See: stop loss basics) A stop loss is like an emergency exit when your trade has proven that it's not going to work out. A stop loss shouldn't be used to prevent just any little loss, it should be used to end your trade when the trade has proven that it is definitely not going to work out. Stop losses get you out of the market at a loss that you find to be an acceptable one, it's not something you should overlook when entering your trade.

With your trade entered, now comes the best part, submit your order to the market, and let the market do what it's going to do. You can certainly watch the action for hours on end letting your emotions whisper in your ear on every move up or down, but it's best to go do something else and let your programmed logic handle your decisions. Something that is common with new traders is to sit and adjust trades constantly, flip directions, etc. This is a counterproductive method of trading and it will slowly drain your account, try to avoid it.

Once your trade ends, whether the result is good or bad, log it in your forex trading journaland start looking for your next trade.

Keep in mind that you can't win every trade, so rather than letting your losses get you down, study them and figure out what went wrong. To be a successful trader you simply need a unified approach to risk and to win more trades than you lose, that's it.

Good luck to you and remember, if you ever have any questions, you can email me at forextrading@aboutguide.com