The forex market is the largest and the most traded in the world, investing in the forex market gives potential opportunity to make a larger amount of profit as well as potentially losing invested funds. Here are a few tips to help traders succeed and stay profitable in their trading careers.
For a lot of trades, inadequate knowledge about how the market works is the main reason they are losing money and are not profitable. The forex market is easy to access and trade, with the availability of advanced technologies and marketing tools. It is required of a trader to take time in learning how these tools work and function.
Due to easy access to the market and the availability of a significant amount of leverage, traders can now start their trading career with little cost. The market being easy to get into should not be treated with low conscientiousness, rather it should be seen as a competitive business in the ever-changing marketplace.
Before getting started with trading forex, setting a realistic goal is important. One has to know why they are getting started with trading and also have executable expectations from trading. This will serve as motivation to keep growing as a trader and stay on top of the game.
To get started with forex trading it is advisable to be signed up with a reputable forex trading broker, this way safety of the fund is assured. A little research such as looking out for brokers with user-friendly platforms, easy deposit and withdrawal options and also the availability of a reasonable amount of leverage, will help in finding out which broker is best to sign up for.
As most forex brokerage will make available a free risk-free practice account, this is a good way to get familiar with trading conditions with the such brokerage.
Being consistent in trading requires having a trading strategy. A trading strategy includes a way of analyzing an instrument's price direction, either to go long or short. Knowing what instrument to trade is the first step to getting started with our analysis. this is done by studying and understanding previous price movement and speculating which direction the market is likely to head in the future, this has been made easier with the help of analysis tools and means of technical indicators. Both professionals and beginner retail traders should keep their analysis simple and chart clean to avoid messy charts which may lead to confusion and bad trades. Calculating position sizes to avoid overtrading helps traders stay in the game for longer. The main cause of overtrading for most traders is setting unrealistic goals, goals like making so much in a small amount of time, this should be avoided at all costs. Over leveraging trading accounts is also a cause of overtrading; therefore, a trader needs to trade using reasonable leverage.
After spending time trading a practice account and testing out our trading strategy by backtesting and forward testing such strategy, if good results are achieved, the next is to go on trading a live account. For beginners, it is best to start small. This helps in managing and evaluating one's trading plan and emotions as well as building the right skill and experience required, during this stage a good trading journal should be kept, which must include dates, instruments traded, placed trades and reasons behind placing such trade and also feelings and emotions we go through when trading. A good trading journal enables assessment of trades, which helps in learning to form our mistakes as well as success in trading. As a trader's experience grows and higher funds are traded, overconfidence can destroy one's career. Trading like we can control the market is a bad habit and should be avoided.
Investing in the ever-changing forex market requires a trader to keep up with the dynamics that come with it. A good forex trader needs to adapt quickly to every market condition, either trending or a ranging market profile. Different markets should be treated differently. A ranging market or choppy market should best be avoided if the direction is not clear, it is best to trade in the direction of the most recent market trend.
Knowing what session to trade helps a trader know what time to trade, the Tokyo, London and New York sessions being the major trading sessions in the forex market and when the most volatility should be expected.
Making a profit in forex trading should not be a trader's only focus, a trader also needs to pay attention to ways of not losing money, this is done by practising risk management plans. Beginner trades, as well as professionals, need to trade using stop loss and take profit orders, this helps in managing trading emotions thereby improving performance.
A trader should expect to have losing trades. As losing does not make one a bad trader, Rather losing trades should be seen as homework to learn the reasons behind such loss and to avoid doing the same mistake again in the future.
To be a consistent forex trader, practising a good trading habit and having the right mindset are required. Staying disciplined with adequate self-control is what differentiates good traders from bad traders. A trader should know when to stop trading as well as when to review their trading plan when necessary. Having the right mindset will help a trader stay focused on achieving their goals in trading. Staying calm and trading without fear will eliminate bad analysis.
For day traders in the forex market, volatility plays a big role in determining a day's profit. their daily volatility check is required to know what to expect for the day, traders should also be updated about an important news release, as a rapid change in volatility can be observed during such news.
As stated above some of the factors that influence a trader's profitability in the market, include settings unrealistic goals, over leveraging, over trading, trading with emotions, poor risk management plan, bad trading habit and not having a good trading strategy, all these factors should be looked into to stay profitable and make money from forex trading.
As attractive as forex trading is, being successful can be quite challenging. It is required to spend time learning the proper skill needed, managing emotions, and having a good investment plan and a trader should only risk money they can afford to lose.