Tips To Be A Better Trader in Forex Trading
Statistics show that only 10% of forex traders are making consistent profits, while 90% are actually losing money. These 10 tips about forex trading can guide you towards the path of profitable trading similar with the currency trading experts:
1. Create your personal strategy towards your trading goals
Setting your trading goals is very important as a new forex trader as it can guide you towards choosing at a wide selection of trading methods available. Define what kind of trading style you are comfortable with. After establishing these, you can now start creating your trading plan that you can use to keep you going off track.
2. Use multi time frame analysis and take a top down approach
A lot of traders focus only on the time frame they are trading in and basing their decisions off it, which is a mistake. Use this approach to increase the potential of your trades to succeed. Analyze different time frames so that you can confirm the success of your trade or filter bad trades based from this. Get a wider view of the action of prices by starting with a higher time frame chart then close in to your time frame for trading.
3. Know what to expect by testing your strategy
Traders need to find the high probability setups and learn how to manage risks. This can be achieved through validating and testing your forex strategies which in return can build your confidence in your trading decisions.
Traders should know the probability of their trades by learning from your history data either through a backtesting software or manually checking your log of losing and winning trades. Over time, this can help you improve your analysis of your trading patterns and identify chart patterns.
4. Create your trading plan and keep a journal
To trade like a pro, you need to create a trading plan and stick to it, which is something most traders don’t practice. By having a trading plan that goes with your trading strategies, you are keeping yourself on track and focused on what you have planned to do and at the same time teaching you discipline. Keep also along with your trading plan, a journal with records of all your trading and its results. This will aid you in understanding your thought process better during that time, allowing you to take action on what needs to be improved.
5. Trade on higher timeframes and stick with it
A number of traders believe that trading in numbers in small timeframes would earn them more profit. But the truth is, trading with only a few at higher timeframes is where real profit is made. There are a lot of obstacles, along with the transaction costs, that make day trading an uphill battle for most.
In the higher timeframes, the transaction costs are lower and the probability rate of your trade setups is higher. This also allows traders to choose the best setups and have time to perform other tasks.
6. Avoid too many indicators and keep it simple
If you prefer to use indicators, be sure to narrow it down to a single or two at most, as having too many will only cause distractions to you and just cloud your judgement. Better yet, try to understand the movement of prices thru the imbalances of supply and demand and learn how to read price actions. This simplifies your trading and provides more potential in profit.
7. Understand key support and resistance levels
These are price levels that both sellers and buyers have shown interest in where prices have been influenced due to the number of trades. Future prices and amount of traders can be forecast using these levels. You can also base your trade management and entry with these levels. Even large market players look out for S/R levels.
8. Check scheduled news events before trading
The market can be heavily impacted by scheduled news events, that’s why traders are advised to watch out for important releases and news events of the country’s currency you are trading. These events can make the market volatile, so proper risk management is required. The first goal is to preserve your capital as a trader.
9. Concentrate on trading price actions in the market
The best indicator for trading is already available to all traders – the price itself. All other indicators compute from the price itself. Reading the price action is the simplest and yet a very effective way to approach the currency market.
10. Set trading goals realistically
If you believe that in forex trading you can just sit by the pool or hangout at the beach while you a system earn you $200 a day, you are already setting your expectations up for failure. Trading in forex always has risk, and you can expect that your investment will be reduced by as much as 75% if you don’t manage risks properly. That’s why you need to set realistic trading goals for yourself.