15 Tips and Secrets for Successful Forex Trading - ForexShop.net

15 Tips and Secrets for Successful Forex Trading

Successful Forex Trading can seem difficult for the uninitiated. However, success is possible if one takes the proper steps and trains properly. Like training for a marathon, training is essential to successful Forex Trading. Success requires targeted effort, practice, patience, and time.

Forex traders need to have specific goals in mind. With the right direction, training, and guidance, mastering the foreign exchange market is within anyone’s reach. Successful Forex Trading has little to do with hot picks, which often fallacies are created by people masquerading as experts in this field.

On the contrary, success stems from the ability to learn from both right and wrong trading choices to determine the patterns and strategies that work best for one’s personality and goals. People are different; therefore, no single trading strategy will work for everyone.

Fortunately, there are several tips for successful Forex Trading that can help beginners master the complexities of the largest market in the world. The FX market dwarfs the bond and stock markets’ average daily trading volume value. Forex traders, therefore, have several inherent advantages over traders who engage in other forms of financial trading.

Small investors with modest capital can find success and trade their way to a fortune. The forex market is one of the few markets that can make this a reality. Trading the forex market is relatively easy. However, doing it well and generating a consistent income is not easy. Therefore, it is essential to learn the secrets and tips for success.

1. Pay Attention to Daily Pivot Points

Forex traders should watch daily pivot points closely. This is especially important for day traders. However, it is also essential for swing traders, position traders, and even traders who focus on long-term positions. It is necessary because tons of other forex traders do the same.

In a certain way, pivot trading is like a self-fulfilling prophecy. Essentially, markets often find resistance or support at pivot points since thousands of pivot traders place orders at those points. Consequently, when a large volume of trading moves happens at these points or levels, there is no other reason for the move except that many traders placed orders expecting such a move.

However, pivot points should not be the only basis of a Forex Trading strategy. Instead, regardless of one’s strategy, one should watch these points for signs of either potential market or continuation of a trend. Forex traders should look at pivot levels and the trading activities as a confirming indicator to use in conjunction with their chosen strategy.

2. Define Trading Style and Goals

Before setting out on any journey, travelers need to have a clear idea of where they are going and how to get to their destination. In the same way, forex traders need to have clear goals and ensure that their trading strategies will help them achieve those goals.

Each Forex Trading style or strategy comes with a different risk profile. Therefore, traders who want to win in Forex Trading need to find and adopt the right approach and attitude to trade profitably. Those who cannot imagine going to sleep with an open market position, for example, should consider focusing on day trading.

Forex traders with funds they believe will benefit from a trade appreciation over several months; on the other hand, they should think about position trading. Essentially, a forex trader needs to determine whether your personality fits any trading strategy. Any mismatch will probably lead to certain losses and stress.

3. Trade with an Edge

Successful forex traders only risk their hard-earned money when a market opportunity provides them with an edge. In other words, they do so when the opportunity presents them with something that will boost the chances of their trades being successful. This edge can be various, even simple, such as selling at a price level that one identifies as solid resistance.

Forex traders can also increase their probability of success and their edge by having several technical factors in their favor. Suppose the 100-period, 50-period, and 10-period moving averages meet at the sal. It will likely offer significant resistance or support for a market because many traders will be acting together by trading off any of those averages.

Converging technical indicators also provide a similar edge. This happens when different indicators on many periods assemble to provide resistance or support. Having the price hit an identified resistance or support level and having price movement at that level indicates a potential market reversal.

4. The Trading Platform and Broker

Forex traders should spend adequate time researching a suitable trading platform. A reputable broker is essential to identify and understand the difference between brokers and determine how they go about making a market and their policies. Trading the exchange-driven market, for example, is different from trading in the spot market or OTC market.

Traders should also choose the trading platform that fits the analysis they want to do. Traders who want to use Fibonacci numbers to trade, for example, should ensure the trading platform they choose can draw Fibonacci lives. A good platform with a bad broker is just as bad as a poor trading platform with a good broker. Therefore, forex traders need to find the best of both.

5. Preserve Capital

It is more important for traders to avoid huge losses than to make huge profits. This concept may not sound quite suitable for people new to Forex Trading. However, it is essential to understand that successful Forex Trading means knowing how to preserve or protect one’s capital.

According to the founder of Tudor Corporation, Paul Tudor Jones, playing great defense is the most important rule of trading. He is a great trader to learn from and study. In addition to building a hugely successful hedge fund, Tudor Jones has an excellent record of profitable trading.

He also played an essential role in creating the ethics training program needed to gain membership in all futures exchanges in the United States. Protecting the trading capital, or playing great defense, is very important in Forex Trading because many people who venture into Forex Trading cannot continue trading due to running out of money.

Many forex traders drain their accounts soon after they make a few trades. Having strict risk management practices is essential for people who want to win in Forex Trading. Traders who manage to preserve their trading capital can continue trading for as long as they want to and might eventually become huge winners.

One great trade can fall into you’s lap and significantly increase your profits and account size. One does not need to be the most brilliant trader to make money in the forex market. If nothing else, the luck of the draw can have traders who manage to protect their capital stumble into trades that generate enough profits to make their trading careers a considerable success.

6. Small Losses and Focus

After forex traders fund their trading accounts, they must understand that their capital is at risk. Therefore, they should not depend on that money for their daily living expenses. It is better to think of those funds as vacation funds. Once their vacation is over, their money is gone.

Having this trading attitude will help prepare them to accept and learn from small losses, which will also help them manage their risk better. Forex traders should focus on their trades and take small losses expected in any business, rather than constantly and obsessively focusing on their equity.

7. Simple Technical Analysis

Consider this example of two forex traders in highly different situations. The first trader has a specially designed trading computer with several monitors, a large office, expensive furnishings, trading charts, and market news feeds. He also has several moving averages, technical indicators, momentum indicators, etc.

On the other hand, the other trader works from a relatively simple office space and uses a regular desktop or laptop computer. His charts reveal just one or two technical indicators on the market’s price action.

Most people would consider the first trader to be more professional and highly successful, and they would probably be wrong in their assumption. The second trader is closer to the image of a forex trader who wins consistently. Traders can apply numerous forms of technical analysis to a chart. Having more, however, does not necessarily mean having better vast.

Using many indicators might make things more complicated and confusing for a forex trader. They amplify indecision and doubt, causing him/her to miss many potentially profitable trades. Therefore, it is better to have a simple trading strategy with just a few rules and a minimum of indicators to consider.

A few very successful forex traders make money from the forex market daily without using technical indicators overlaid on their charts. They achieve this impressive feat without taking advantage of a relative strength indicator, trend lines, trading robots, moving averages, or expert advisors. Their market analysis involves a simple candlestick chart.

8. Weekend Analysis

The forex market ceases operation on the weekend. Therefore, forex traders should use this time to study their weekly charts to identify news or patterns that could affect their trades positively or negatively. This will give them objectivity, which will help them make more intelligent trading plans.

9. Placing Stop-Loss Orders at the Right Price Levels

In addition to protecting one’s capital in case of a losing trade, this strategy is also an essential aspect of successful Forex Trading. Many newcomers to the forex market assume that risk management means placing stop-loss orders close to the entry point of their trades. This is partly accurate; however, habitually placing stop-loss orders too close to their trade entry points might contribute to their lack of success.

Sometimes, stop-loss orders can stop a trade, only to see the market make a reversal in favor of the trade. It is common for novice traders to endure watching this happen. Sometimes, this reversal proceeds to a level that would have seen them gain a sizable profit if the stop-loss order had not terminated the trade.

Traders should enter trades that allow them to place stop-loss orders close enough to their trade entry points to avoid huge losses. However, they should put them at a reasonable price level based on their market analysis. Based on the market property general rule of thumb when it comes to proper placement of stop-loss orders is to place them a bit further than the price the market should not trade.

10. Use a Consistent Methodology

Before a prospective trader enters the forex market, you need to have a good idea of how you will make trading decisions. Essentially, forex traders should know the information they need to make intelligent decisions on entering a trade or exiting one. Some traders choose to analyze a chart and the economy’s fundamentals to decide the best time to trade.

Others, however, prefer to perform technical analysis to determine the ideal time to execute a trade. Whichever methodology or strategy you choose to employ, you need to be consistent and ensure the preferred method is adequately adaptive. In other words, it should be flexible enough to handle the forex market’s changing dynamics.

11. Choosing the Right Entry and Exit Points

Most inexperienced forex traders do not know how to judge conflicting information often presented when analyzing charts in various timeframes. Certain information, for example, might indicate a sell signal on a weekly chart but show up as a purchasing opportunity in an intraday chart.

Therefore, if you use a weekly chart to determine your primary trading direction and a daily chart to tie your entry, you should try to synchronize the two charts. For example, if the weekly chart provides a buy signal, you should wait for the daily chart to confirm this signal. In other words, keeping signal timing in sync is a good tip for successful Forex Trading.

12. Calculating Expectancy

The formula to use to determine the reliability of a trading system is expectancy. Forex traders should analyze and compare past winning trades against losing trades, which will help them determine the profitability of their winning trades versus how much money they lost in their losing trades.

A simple way to do this is by looking at their last ten trades. New forex traders who have not yet made any trades should study their chart to identify points where their trading system suggests an entry and exit point. In other words, new forex traders need to determine whether their design is profitable.

They should write down their observations, total their winning trades, and divide the amount by the number of successful trades. For example, if you made ten trades, four of which flopped and six were successful, your win ratio would be 60% or6/10. If the six winning trades made $4,800, your average win would be $4,800/6 = $800.

If the trader’s losses amounted to $2,400, your average loss would be $2,400/4 = $600. By applying these results to the formula for calculating the reliability of a system, the trader will get E = [1 + (800/600) x 0.6 – 1 =0.4, which is equivalent to 40%. A positive expectancy of40% means that the trader’s trading system will likely generate 40 cents to the dollar over the long term.

13. Positive Feedback Loops

Forex traders create a positive feedback loop following a well-planned and executed trade. When they plan a trade and execute it as expected, traders tend to develop a pattern of positive feedback. In other words, success tends to breed success, which, in turn, builds confidence. This is especially true if the trade generates significant profits.

Even if you suffer a slight loss following a well-planned trade, you will still build a positive feedback loop.

14. Keeping Printed Records

Printed records serve as a good learning tool for forex traders. Therefore, traders, especially new ones, should print their charts to create a list of reasons for any trade, including the things that sway their trading decisions. They should mark the entry and exit points on the chart and make relevant comments, such as emotional reasons for taking specific actions.

Forex traders need to objectify their trades to develop the discipline and mental control required to execute trades according to their systems instead of their emotions, greed, or habits.

15. Stress Less

This is an obvious tip for successful Forex trading. Trading under stress tends to lead to irrational decisions, costing you a lot of money. Therefore, forex traders should identify the source of their anxiety and try to eliminate it or limit its influence on their actions.

When stress threatens to take control, you should take deep breaths and try to focus on other things for a few minutes. People have different ways of overcoming anxiety. Some exercise, while others listen to classical music. Traders should learn what works best for them.

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