Understanding the Forex Market Principles

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forex market principles
Understanding the basic forex market principles is the foundation for developing a proper forex strategy.
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Overview

Understanding the forex market principles is extremely important for every trader. Knowingly, in the last article we described some important principles of money management. They allow you to manage time. It is particularly the volume of your trades and their increase or decrease, that changes the time when your account will be wiped out.

For the same reasons, when using a bank to buy certain currency, you have plenty of time to wait for the moment when the reverse exchange will be profitable for you.

On the other hand, there is a marginal loan. It imposes restrictions on us because of which we cannot hold open orders for a long time.

Related: Advantages of Leverage for Successful Trading

Why do traders lose in the forex market?

The same limitation is the stop loss. Take profit does not force you to close the position, as when in profit you can keep orders indefinitely.And here is the axiom:

The more restrictions imposed on your trading, limiting the time that allows you to keep open orders, the higher the probability of obtaining a loss.

The basis of any profitable trading system is the understanding of this process and forex market principles. Have you ever wondered why most people always lose? Because we adhere to the collective opinion – the opinions of the crowd. Stop loss is considered professionalism.

Nevertheless, professionals profitably trade, knowing how long to wait. Everyone else uses stop loss which results in constant losses and failures. And these traders cannot understand their problem.

Understanding forex the market principles

The brain remembers not only in the form of a theory, but also in behavioral patterns. If you learn to wait for any market movement before the normalization of the market, then you will never receive losses.

This means that you will always be in profit. The only thing that you will have to do is to find ways to increase profits, that will not increase your risks.

Since the forex market does not have any precise signals, there is no reason to look for them, or wait. Swim along the waves, the price goes down, go along with it, the direction has changed, go along with it. Those are some of the main forex market principles.

Related: What You Need to Know About the Forex Market

When should be close a trade?

Remember, if in loss we do not close the trade immediately. The only time when this is done is when the trade is in profit and this was part of your trading strategy.

In order to swim along the waves, you need a landmark that will show the points when the price changes its direction.

This can be done using both oscillator and trend indicators, fractals, waves, pitchfork, etc. Choose yourself only one tool on which you will navigate the trading process. If you choose more than one, you will be confused.

Do not use periods below D1. In work on such periods, you can never take into account all the maximum amplitude of fluctuations in market movements. Remember, if you already have a reference point for changing the direction of trade, then work for a longer period that gives you the opportunity to get more profit. Avoiding shorter time frames makes it possible to reduce risks.

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