How To Become Successful in Forex Trading?

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how to be successful forex trading

Everyone who starts trading Forex wants to succeed, but unfortunately, most don’t. Here are 4 key aspects of trading that traders need to master if they’re going to become successful in FOREX trading. Obviously, lack of training and poor technique leads to poor results, but all this is relatively easy to overcome. This article is dedicated to many new traders who are increasing every day. That seems great but nevertheless, they tend to trade forex without preparation and end up destroying their accounts.

Selecting a good forex strategy
Learn From Your Mistake
Controlling Emotion while Trading
Selecting a Successful Money Management System

1. Selecting a good Forex strategy

In the foreign exchange market, investors can profit regardless of whether the economy is developing or declining. This is the shorting mechanism of the foreign exchange margin. Every trader needs a successful strategy to find himself in Forex trading. That means finding a strategy that will suit his specific personality and lifestyle in order to make trading a lot easier. A suitable trading strategy will be compatible with his psychology, his personal characteristics, and his lifestyle. There is no reason to go against yourself by choosing a strategy that will work against you rather than for you.

Learn about on forex market in our previous article on what is forex trading.

So, there are 4 main groups of trading strategies that Forex traders commonly use: Scalping, Day Trading, Swing Trading, and Position Trading.

Scalping and day trading are short-term strategies where the trader doesn’t roll over positions overnight while swing and position trading are long-term strategies where the trader almost always rolls over positions overnight. Most of the traders feel secure with a long-term strategy.

Each of these different trading strategies has its own set of advantages and disadvantages, hence it’s best for new traders to try each of them and see which one fits them the best. One thing that works great for one trader may not work at all for another trader. It’s all about trying out and testing a lot of things to find what works best individually for you. But all kinds of trader needs to know well forex technical analysis to understand market bias.

Having a basic knowledge, you must find an appropriate strategy to be your first work tool. That is, it will look for a method that should be tested a hundred times. This set of tests or simulations that you will perform on your method is called Backtesting.

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2. Learn From Your Mistake

Einstein defined insanity as “doing the same thing over and over again and expecting different results”.

It’s critical that you as a trader learn from your mistakes and always look to change something until you find something that works well for you. Whether it’s your indicators, your trading or your psychological habits is important to always strive to improve things, to be better today than you were yesterday.

So, when you make a mistake and you catch yourself doing it, don’t hate yourself and stop beating yourself up. That’s not going to help you. Instead, review what you did wrong, think about how you can improve from there, and work on achieving better results.

Make it a constructive process in which you learn from your mistakes and improve yourself, instead of a frustrating experience. Frustration will not get you anywhere.

3. Controlling Emotion while Trading.

Trading on emotions is one of the worst things a trader can do. Emotional trading is a leading cause of many blown-up accounts and many losing trades. Traders can reduce emotion-induced trading mistakes by improving their “trading psychology”.

Whether it’s anger, greed, or some other emotions, trading based on your feelings is not the right way to manage a trading account as it sure won’t get you far in terms of your profits. The only thing is, it’s very hard to control your emotions in the heat of the moment when you are trading.

So, what can you do to minimize acting on your emotions while trading?

One way is to create a clearly defined trading blueprint or plan that clearly states how you should act in certain situations while trading. Try to cover as many difficult situations as possible and then with a calm head write down your trading plan.

Then when those difficult situations in your trading come, you will just act as it is stated in your trading plan instead of acting on your emotions.

best forex money management

4. Selecting a Successful Money Management system

For trading Forex, money management or risk management is at least just as important as your trading strategy. The risk you take on every trade determines how risky your overall trading style is. It’s an absolutely crucial aspect of successful trading.

So, what are some rules you can follow to make sure you don’t blow your account?

The common advice is to never risk more than 2% of your total account balance on any single trade. So, that means that if you are going to adopt this money management strategy you will need to do some calculations. Namely, the size of your stop loss in dollar terms needs to be 2% of your total balance. For example, if your account balance is $1,000 your maximum stop loss amount should not exceed $20. Since the article is not all about money management I keep it short. You can see more about forex money management

Of course, the lot size of each trade also greatly affects your risk and reward. For our premium forex signals subscriber, we advise taking the highest 2% risk in the money management guide. So you must make sure that the size of your positions fits within the 2% maximum risk per trade.

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High Reward Low-Risk Entry

In forex trading, setting a tight stop-loss and having a high target is crucial for successful risk management. By setting a tight stop-loss, traders aim to limit potential losses if the market moves against their position. This helps to protect their capital and minimize risks.

On the other hand, having a high target refers to setting a profit target that is significantly larger than the initial risk taken. This allows traders to potentially capture larger gains when the market moves in their favor.

By combining a tight stop-loss and a high target, traders can achieve a favorable risk-reward ratio. This means that even if they have more losing trades than winning trades, the overall profitability can still be positive due to the larger gains made on winning trades.

It is important to note that successful forex trading requires careful analysis, strategy development, and continuous monitoring of market conditions. Managing risk effectively through the use of tight stop-losses and high targets is just one aspect of a comprehensive trading plan.

Below are some trading examples in the short video on how low-risk need to maintain

Note – This article was first published by Mr. Roy at huffingtonpost.com

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