The reason why many traders enter the Forex market with trepidation is that they have several doubts and fears. Many of them follow someone’s advice to trade in Forex and then spend the better part of the next few years trying to recover their expenditure. Although trading in Forex is a risky affair and there aren’t any shortcuts to success, you can be smart and follow some general guidelines to make more profits.
Those individuals who make millions of dollars in the Forex market do not get there purely because of good luck. Every industry has its share of experts, passing down their tips and tricks to new players to help them increase their profits. Here are some of the trading tips that you can learn within 10 minutes.
Learn your strengths and weaknesses
To be a successful investor, you need to know your strengths and weaknesses because it helps you come up with a plan that effectively keeps your weaknesses to a bare minimum while complementing your strengths. Although sometimes it happens naturally, most of the time it demands a certain amount of experience, experimentation, and self-reflection.
For instance, try to figure out if patience is your strong suit. Are you prepared to wait a while in order to find suitable trading occasions or are you dealing with a large number of ideas at a time? If you are a patient investor, then swing trading might be a trading style well-suited for you since the opportunities take time to appear, otherwise, you might try day trading where there are several opportunities on a daily basis.
Simplify your approach
Spending excessive time pondering over your decisions can lead to fatigue and impair your ability to make informed trades. You shouldn’t complicate things unnecessarily and make concessions only when you have to so that you can focus on more important issues.
Having your workspace organized is another thing you can do to simplify your trading approach. If you are using a laptop or computer, make sure your trading records are all stored in one place where you can find them easily. Moreover, you should set time limits for decisions and get rid of emotions while analyzing charts and other economic data.
Place your stop loss based on the market structure
It is a big mistake to set the stop loss on the basis of the amount of money you can afford to lose. Instead, you should place it based on the market structure, so that when it gets triggered, you would realize your mistake.
For instance, if you are trading a support area, the triggering of stop loss would indicate a broken support area. Similarly, during breakout trading, the triggering would mean that the breakout has failed.
Find a suitable trading strategy for yourself
The aim of trading in Forex is to make profits fast based on the price swings. Thus, you should enter a trade after knowing what amount is appropriate for investing and what you can afford to lose. Do not just jump on the bandwagon and take some time to research before diving in.
If you have abundant time on your hands, it is better to engage in intraday trading since you need to monitor your trades at all times. Conversely, if you have a regular job and don’t have much time to spend watching the trends, a long-term trading approach will be perfect for you.
Don’t lose hope after a few losses
The Forex market behaves unpredictably sometimes and you won’t always get expected results. It is important to stay cool in such situations and keep your emotions in check. Remember, trading is a logical game and there is no place for impulses and emotions in this field.
Even if you have suffered major losses, try to analyze why you failed. You need to remember that short-term outcomes are mostly random and you cannot discard a strategy based on a few failed trades. At least 100 trades need to be conducted to assess its effectiveness.
Take small risks
Before conducting a trade, try to evaluate what percentage of your capital you should risk. As a general rule, you shouldn’t risk more than 1-2% of your capital for each trade. For instance, if you possess a capital of $60,000 and you are risking 0.6% of your account with every trade, you can lose at most $360.
Therefore, you should put away a surfeit amount of money you can afford to lose and use it for investment purposes. In order to minimize loss, you can use the help of stop losses and various other methods. If you are a novice trader, you should concentrate on at most 1-2 currency pairs for each session because with fewer pairs you can monitor your trades better and easily find trading occasions.
Maintain a trading journal
While maintaining a trading journal may seem like a dull affair, it helps you to be more consistent and disciplined while carrying out your trades. You can use it to keep notes about the effectiveness of different strategies, trading charts, patterns, and other events that affect your trades.
Having a trading plan makes you more disciplined
Seasoned players in the Forex market have to be alert and fast to make profits, but to think fast is something they are not required to do. This is because they have a well-established strategy. This makes them much more disciplined and they can check their emotions better.
These strategies will increase your likelihood of success in the Forex market, but you must set achievable goals. Try to rack up small wins and take bigger risks only when you feel confident enough.