Forex trading is a popular choice for many people who want to make money and take control of their financial future. It’s also a steadily growing industry that has grown exponentially in recent years, with more and more retail traders making the switch to Forex trading. If you’re considering Forex trading, but you’re still new to it, then you should know that there are five essential habits you must develop before starting. Chances are, if you start developing these habits now, then your long-term success will be much higher than if you don’t start at all!
Let’s look at some simple (but important) trading habits that have helped many traders develop their skills.
1. Use stop losses
Trading losses are probably inevitable. Even the most successful traders have bad days.
Unfortunately, many inexperienced traders would rather be correct than profitable, and using stops would prove them wrong. This may result in uncontrollable losses and, as a result, blown accounts.
You have no control over market behavior, but you do have control over how much money you lose per trade. You can adjust your stop losses by deepening, loosening, or trying to adjust them, but you must always have them.
2. Make pre-trade preparations
You don’t go into a match without a game plan if you wanted to win, and you wouldn’t start trading without a strategy or play in mind at all.
Those who do not have a plan in place unnecessarily expose themselves to psychological mistakes that could result in incorrect losses.
Making pre-trade plans can be as simple as stating key economic events and chart levels, or as complex as considering multiple setups and emergency plans for a single event.
3. Journal your trades
In any performance or goal-oriented attempt, keeping a journal is an important requirement. Keep in mind that your broker logs only provide you with the raw data of what occurred, not why it happened.
Also, you can’t improve anything you don’t predict. The important thing is to keep track of your progress and stay focused on it.
A trading journal is a must-have for consistently profitable traders, whether it includes just your basic journal statistics or even the ones that are overlooked.
4. Allot a specific time for trading
Just because forex trading is a 24-hour party doesn’t mean you should spend most of your time looking at the charts.
Many of you are, in fact, part-time traders. This means that trading time is limited, and even less time is available for other trading activities.
However, you can still make the most of your trading time by avoiding distractions and focussing on trading activities during a specific time of day.
5. Find your niche
I’ve met a lot of newbie traders who have been trading for months but still haven’t started to figure out what strategy that works best for them. Specializing is something I always recommend.
While it’s always a good idea to experiment with different methods and systems, it’s also useful to know which currency pairs, time frames, and indicators work best for you.
When you’re ready to improve your trading performance, you’ll at least have a place to start.