Forex trading can be exciting, rewarding and lucrative, if you’re disciplined about applying sound trading principles and strategies. Ultimately, there is no single formula or strategy for trading success. Traders need to consistently hone their skills through hard work, persistence, good research and planning.
Here are 10 things successful forex traders do, which you can adopt to pave way for trading success.
1. Understand needs & goals
People choose to trade forex for different reasons. Some are new traders getting started in the markets whilst others are full time workers trading in the evening or part-time workers looking for ways to supplement their income. Identify your needs and decide whether being a trader is just a hobby or if you’re looking to turn it into a full time job. You can then devise the appropriate strategies to work towards that goal.
2. Read as widely as possible
Like every profession, mastering the basics and foundations is imperative before one can excel. Before you start trading, read as widely as possible on all things forex – and make sure they are from reputable sources. Familiarise yourself with the way the forex market works and establish realistic trading strategies based on your personal goals.
3. Plan your trades and stick to the plan
There is no one-size-fits-all approach to trading plans. However, good trading plans are usually formulated based on considered research, market observations and sound logic. Don’t let emotions or speculations drive your decisions as this can often lead to mistakes and bad trading. Plan your trade, both entry and exit, before placing it into MT4. Avoid second guessing yourself or deviating from your plan.
4. Choose your broker with care
It’s important to find a trading broker you feel comfortable with and one that offers a trading platform that is appropriate for your style of trading. Review a wide variety of brokers, trial demo trading on different platforms and compare offerings. If you’re new to trading, look for online trading platforms who make trading very simple, giving access to trading tools, analytics resources, education and 24-hour support.
5. Start with a demo account
It’s wise to start with a demo account so that you can practise trading with virtual money, at no risk. By placing some practice trades in a disciplined manner you’ll start to get a good feel for what it is all about. However, don’t do it for too long as you will not learn any money management skills from a demo account. Once you’re ready to start a live account, trade only in small amounts.
6. Keep track of your trading activity
A successful trader will always observe their successes and failures. Keep a daily record of your trading activity and analyse it regularly to see what works and what doesn’t. It may also help for you to talk through your trades with a friend or colleague. They don’t need to be a trader either. Verbalising your decision process alone allows you to pick up on those moments when you are acting irrationally or emotionally.
7. Manage risks & know your exit strategy
When it comes to forex trading, risk management is key. ALWAYS have stop losses in place to protect capital. A stop loss essentially limits the risk that a trader is exposed to for each trade. Never add to a losing position unless it is a pre-planned structured trade with different entry points. It’s equally important to have an exit strategy in place. Designed to help you get out of both winning and losing positions, this should be considered before entering any trade and included in your trading plan.
8. Don’t go against the markets
Remember, the trend is your friend, so pay attention to the markets. Spend some time analysing the markets over the weekend and note down any patterns, trends or news that could affect your trade. These observations can help you plan your upcoming trade week ahead.
9. Be patient
Remember that trading is like building a wall – one brick at a time. Those who think they will get rich quickly are generally not around for too long before their account blows up. Successful trading takes time and it’s rare to see immediate results.
10. Know how to handle losses
Losses aren’t ideal, but they can happen. Avoid blaming the market and admit your mistake. Instead of wallowing in your losses, remain calm and focus on reassessing your strategy. Ask yourself if you are trading the correct currency pair, chart time frame or time zone. Then address your risk management. Perhaps your goals aren’t realistic or your position size is too large.