How To Become Successful in 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 lead 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.
1) Selecting and implementing a good forex strategy
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.
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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 trader 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 for 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.
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 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, examine 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.
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 here 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 money management guide. So you must make sure that the size of your positions fit within the 2% maximum risk per trade.
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Note – This article first published by Mr. Roy at huffingtonpost.com