Ten Tips to Make You a Better Forex Trader
There are a lot of figures and numbers showing how forex traders make money as others lose. The commonest of these statistics is that 80% of forex traders lose their money, and 20% are consistently raking profits. This brings us to the main question, “What do the 20% of the traders do to operate profitably?” And equally important is, “Why does the majority do to lose?”
The best forex traders are always working on honing their skills using practice and discipline. So, in order to join the league of the 20% of the profitable traders, we are going to provide you with tested and proven tips to apply.
1. Define Your Forex Trading Goals and Identify a Good Strategy
As a forex trader, the first thing is drawing the right goals. When new traders join forex trading, most of them lack concrete goals, a fact that often results in losses. Your focus should be developing realistic expectations and ensuring that the preferred methodology perfectly fits your personality profile.
To develop your goals and a good strategy, you need to decide on a number of things, including the following:
- Do you prefer trading with the trend or following the countertrend?
- Are you okay holding your trade for longer periods, say, overnight, several days, or more?
- What time do you want to devote to following the market?
- Will you trade on a full-time basis or simply want to supplement current income?
Once the trading goals and preferred type of trade are clear, create a good trading plan that will guide your operations in the market.
2. Select a Reputable Broker
Having a reputable broker in forex trading is very important if you want to be successful. The best broker should have a platform that is easy to use, offer good analysis, and help protect traders’ assets. One of the top brokers out there is Capex global trading platform, and comes with the following benefits:
- Capital leverage
- Negative balance protection
- Offers traders bonuses to help them trade more without risking their cash
- Offers multiple CFD trading instruments including forex, indices, commodities, indices, bonds, and Cryptocurrencies, and commodities
3. Establish the Entry and Exit Points
Today, a lot of traders get confused because of conflicting information, especially on charts about different timeframes. For example, what appears on a buying opportunity on a monthly or weekly chart could, indeed, show up when observed as an intraday chart. So, if you take the trading direction from a weekly chart and use the daily chart to time entry, it is important to ensure you synchronize the two. Simply put, if the weekly signal is giving you a buy signal, you should wait for a confirmation from the daily chart before placing your order.
4. In Order to Win, Preserve Your Capital
When trading in foreign currency, it is important to avoid making losses that are more than the profits. Although this might not be pleasing, especially for novices, the truth is that being a winner requires you to understand the best way to preserve capital. So, focus on playing a defensive game by avoiding losing all the trading money so that you will never lack resources to take an opportunity when it presents itself. You can do this in three ways:
- Avoid overtrading
- Do not take too much risk with a single trade
- Improve your skills in forex trading
5. Avoid Trading with Emotions
When trading, emotions are your worst enemy. Some people see forex trading as a game where they try beating the market, but they get overwhelmed by disappointments. If you trade with strong feelings of disappointments, the risk of making the wrong moves is high. Other emotions that you should try to avoid in forex trading include excitement, euphoria, greed, and panic.
As a forex trader, it is important to have a trading plan to avoid making moves based on emotions. Particularly, you should consider starting with small amounts to keep your risk low. When you keep the risk low, it is easy to be calm and realize long-term forex trading goals.
6. Know when to Stop
When you start forex trading, you do not have to sit in front of a computer following the market all the time. The better way to manage your risks and protect your profit is by using stop and limit orders. Using trailing stops is particularly useful because they help you to trail your position at a specific distance as the market keeps moving.
7. Try to Keep Trading Simple
To analyze the forex market, traders use different indicators that help them to determine the right time to enter a trade, hold, or exit. However, you should stick to a few indicators because use so many of them can create confusion, resulting in loss of good trading opportunities.
Because all indicators are derivatives of price, you will be well ahead of most traders by learning the basics of price movement based on supply and demand imbalances. When using trade indicators, it is advisable to reduce them to about two-three.
8. Check Scheduled News Events before Placing a Trade
Scheduled news events raise volatility in the forex market, and it is important to monitor them carefully and establish the expected impacts. The good thing about scheduled news events is that there are many resources online that you can use to stay informed. For example, if you know that a jurisdiction such as the EU or US is releasing a major report, such as data on properties, employment, among others, it is advisable to wait until after the announcements.
9. Trade on a Few Markets
In forex trading, some traders, especially novices, focus on trading in multiple markets and end up losing from lack of comprehensive fundamental justifications. Instead, you should target a few markets because it is easy to stay focused and gain proficiency. If you must target multiple markets, ensure to only work with those that you can analyze well, and make good trading decisions. Remember to analyze your success rate in every market on a weekly or monthly basis.
10. Do Not Be Afraid to Explore
Although it is prudent to be consistent in forex trading, it is advisable also to be exploratory. After some time, re-evaluate your trading strategy to establish where things are not working well. For example, are your profits low because of the currency pairs that you have selected? What will be the impact if you start taking longer with your trade positions? Then, use the findings to re-evaluate your plan and make appropriate changes.
The tips we have provided above will help you take a structured approach to forex trading to become a more refined trader. Remember that forex trading is an art, and the sure way to becoming a pro and raking more profits is through professional and disciplined practice.