Here are the winning forex trading secrets that will help you master the complexities of the forex market. The forex market is the world’s largest market in terms of average daily trading value, dwarfing the stock and bond markets. It provides traders with a number of inherent benefits, including the highest leverage available in any investment arena and market activity every trading day. There is almost never a trading day in the forex markets when “nothing happens.”
Forex trading is usually referred to as the last great investing frontier – the one market in which a small investor with a small amount of trading capital can realistically hope to trade their way to a fortune. It is, however, the most widely traded market by large institutional investors, with billions of dollars in currency exchanges taking place all over the world every day that a bank is open somewhere.
Small changes in behavior can have far-reaching consequences. In order to increase your net profitability, you must reduce losses and maximise profits.
Here are some tips:
1. Do not trade with just any broker
It’s important to make sure you’ve researched your broker properly. Reputable are they? Will your withdrawals be paid for? Your funds, are they insured? For you, a regulated broker with years of industry history is good. Similarly, in the unlikely event that they go bust, a broker with insured funds will ensure you can get your money (usually up to a maximum of $50,000) back.
2. Do not trade with money you can’t afford to lose
This is repeated everywhere, but it is ignored by many traders. Your ability to have psychological balance depends on a huge chunk of Forex trading success. This is difficult when, as a result of trading with funds that you can not risk, you are an emotional wreck.
3. Do not look at the money
It’s hard for traders to struggle, but successful traders understand the importance of ignoring money and focusing on trades. It’s easier to make irrational choices if you look at the cash. This is why, because you suspect a reversal on the way, you close a trade that has gone a bit into profit. A seasoned trader, regardless of what happens, will remain in the trade till the end.
4. There is no room for emotions
You’ll fail if you allow subjectivity and emotions to get in the way of your trade. Judiciously follow your trading strategy and do not see a trade where none exists. Having an open trade at all times is not obligatory! 5. The length of time spent staring at the charts does not automatically translate to profits. Know when to take a break. When you feel overwhelmed, take a break. This is particularly true for intraday traders who, over the course of a trading day, could face consecutive losses. Know when to call it quits or you could fall into the trap of revenge trading, falling into deeper losses as a result.
5. FIND LOW RISK ENTRIES
Losing less is part of earning more. Don’t focus on just how much you can earn. Be careful how much you stand to lose.
The basis of a sound strategy is keeping risk low in a volatile market. There are potent price swings in a volatile market. High risk with high return is the usual context of a volatile market. But if, in that context, you can find a low-risk setup, you end up with a high reward-to – risk ratio.
6. Avoid Overtrading
Traders are ambitious, sometimes goofily so. Many traders believe that they must always be doing something. It’s critical to remember that trading takes time, and that the quality of your trades is far more important than the quantity.
According to the Pareto Principle, “80% of the effects result from 20% of the causes.” In trading terms, this means that “80 percent of your profits will come from 20% of your trades.”
Analyze your previous trades and focus on the 20% that were the most profitable. Try to focus on why they were more profitable so you can better understand your own. Then, look at the other 80% of trades that were either less profitable or resulted in losses. Consider why these trades did not perform as well as others and revise your strategy accordingly.
7. Avoid Under-trading
Do you ever find a great trade setup that you don’t take action on, only to realise later that your theory was correct?
Overtrading is a topic that traders and educators regularly discuss, but few discuss undertrading. Under-trading can be associated with a number of factors, including a lack of confidence and analysis paralysis. Simply put, traders identify the correct setups but fail to start executing their trades.
Keep in mind that there is a notable change between under-trading and avoiding setups with which you are uncomfortable. The former is a psychological battle, whereas the latter is a logical choice.
Focus on why you aren’t placing the trade the next time you find yourself frozen behind the keyboard. If you’re constantly thinking the setup, simplify your approach. If you’re concerned about losing money, set a stop loss and position size that allows you to risk a dollar amount you’re comfortable with.
8. Take Control of Your Losses
Profits are always at the top of the list as traders. After all, the prime task of trading is to convert money into more money. It’s easy to get carried away and lose sight of the very real possible loss. Limiting losses has the same net effect as increasing profits. It is just as important to learn how to manage risk as it is to find profitable setups.
The key to risk management is to have a well-thought-out plan. If you say you’re going to sell when the stock reaches $5, then sell when the stock reaches $5. If you don’t want to lose more than $300 on a trade, set your stop loss at $300.