The first step in becoming a successful forex trader is creating your own productive trading strategy. However, creating a successful strategy takes a considerable amount of time. Apart from that, you will need to have a good understanding of the market, an excellent trading discipline, trading plan, self-control and the ability to accept losses.
The truth is that even the most successful traders have losses. It is simply impossible to have only profitable trades. It is important to remember that in the end your total profits should always be more than your total losses. The Forex market is tough, fast and unstable place. To make a profitable trade, a trader needs to make a decision based on the following:
1. Technical and Fundamental Analysis
2. Understanding of market trends and prospects
3. Timing of opening and closing a trade
4. Not expecting only profitable trades
Trade only the amount of money you can afford to lose If you do not have extra money, it is better not to trade. Forex is a place where passion arises and it is easy to become addicted. It is important to make trades in a total concentration and with a clear state of mind. If you cannot afford to lose money on that trade, you will not be able to make logical decisions, and therefore, you greatly increase the chances of losing everything. Never trade with money that you need for living!
Analyze the market
If you ask any experienced trader, what is most important in the Forex market you most certainly will get an answer – follow the trend, and the trend is your friend. It is important to be in tune with the market. Will the trend go up or down? Is the market strong or weak? How long it took the trend to form, or maybe a new one is just beginning to form?
The basic idea behind the trend is that you should be going in the same direction with it. Of course, not everything is so simple as any trend could turn around at any moment and surprise you! To avoid such surprises, it is necessary to monitor the technical and fundamental news to understand, if this is a new trend, middle of a trend, or whether the trend is strong or weak.
Decide in what time frame you trade
The main purpose of trading in the Forex market is by no doubt money. However, try to not focus only on that. Here are a few points that will help you highlight important points:
1. Plan when to open or close a trade
2. The time interval at which you will trade
3. The size of the trade
Do not trade if you are not sure! Always know why you have opened a certain trade. Was it because of a trend? In case you are not sure it is better not to trade. Being uncertain is a very good sign of a losing trade.
Simplicity is the key to success
Many novice traders think that since forex is difficult, they will need to apply very sophisticated strategies to be successful. A very big mistake is the use of a huge number of indicators and this only complicates the trade and may make your chart unreadable. All you need is:
1. Knowledge of the basic price patterns
2. Excellent knowledge of support and resistance levels
3. A few indicators to confirm your decision
Do not ignore the rules of money management To become a successful trader, you need to learn not only how to make money, but also how to save it. To limit losses always place a stop loss and never move it.
Stick to the plan
The biggest mistake beginners may do is that they sometimes do not follow their initial plan. Immediately stop as soon as you notice the following thoughts:
“Well, what is happening here”
“I want to open another deal, now I will look for it”
“I need to bring back all the money that I lost today”
“Why the price drops, I need to move the stop loss,”
The only way to survive is to stick to the plan. Be concentrated, control your emotions and stay away from any foolish actions!