Most of us are attracted to the forex market because of its profit potential. Still, the profits alone are not the sole reason many people choose to trade in the foreign currency exchange market. The unprecedented liquidity allows for more competitive spreads. Being open 24 hours a day six days a week, the market is very accessible for people who have other jobs. And the market as a whole is void of all the pitfalls of the equities market such as insider trading, exclusion from after hours market and the excessive trading fees on top of spreads. Unfortunately, what most forex ECNs and market-makers won't disclose is the staggering failure rate of forex traders. It's estimated that only about seven percent of traders are consistently profitable. That's a whopping 93% failure rate for the majority.
And yet even in the face of these odds the retail forex market has continued to explode in growth. Between 2007 and 2008 there's been a 41% increase in currency trading volume. Today over 3.2 trillion dollars are traded daily in the wholesale and retail forex markets.
But it's not just the average Joe that's getting it wrong. Surprisingly, even industry experts can make mistakes. George Soros, the notorious hedge fund manager predicted just recently, in Davos Switzerland, that the Euro might collapse. Today nothing could be further from reality. The Euro's demise has not only failed to materialize it has persistently increased in value shortly after Mr. Soros' prediction.
So even if the big shots can get it wrong, how is the average trader supposed to survive?
The solution is to always realize when your currency position is no longer valid.
Taking an acceptable loss seems only logical. But merely applying a predetermined amount of pips as a stop is not an acceptable trading plan. Instead, it's necessary to determine when the trade is no longer valid. This is easily accomplished with point and figure charting.
Although point and figure charting is very simple in its construction it is very methodical in application. The system provides auto-generated buy and sell signals, definitive price objectives and the most important feature of all, a built in risk management feature. This feature is called the three box reversal. Download your Forex ebook @ http://funeasyforex.blogspot.com now.
