If you want to trade successfully as a foreign exchange trader, there are a few prerequisites that have to be met. In the first place you have to get familiar with the basic rules of the forex market. Whether you buy a handbook, attend a seminar or follow one of the many free courses on the Internet, you need to familiarize yourself with concepts such as fundamental indicators, technical indicators and money management. On the basis of that you can then develop your own forex trading strategy.

Secondly you have to learn how important discipline is in trading. Your biggest enemy when you are trading is yourself. Emotions like fear and greed and the rumors that forever abound in the forex market are not the best indicators to base your trades on. The best way to learn discipline is to have a set of trading rules which determine when you will enter or exit any trade and stick to those rules religiously.

Then you also need a sound forex trading strategy. The purpose of this is to maximize your potential returns and at the same time minimize risk. There are a myriad of potential trading strategies available to the professional trader. We will look at just a few examples to give the reader an idea what this entails.

One of the most elementary trading strategies and one still followed by many traders, is the simple moving average, also called the SMA. A very common approach in this regard is to enter the trade as soon as the price rises above the moving average and once it drops below this level again to exit the trade.

Some trading strategies don't only involve selling a currency when it moves below the SMA, but will in fact do a reverse trade and therefore establish a "short" position. This type of strategy will mean that you are always actively in the market, either in a long or a short position.

The SMA is an example of a very simple trading strategy. It works quite well for entering the market, but not always so well when you want to exit again. By the time the price is back at the moving average level, it might already be too late to make a large profit. That's why many traders combine the moving average with another technical indicator, such as the MACD, which might pick up a falling market sooner than the moving average.

Which particular forex trading strategy you follow is not really that important. What is important is that you have one and that you follow it. Otherwise you will be at the mercy of emotions and rumors to make trading decisions.