7 Effective Tips of Successful Forex Trading
Forex trading can be quite complicated especially to novice traders.
Most people want to acquire massive wealth overnight which is unrealistic.
When starting to trade in forex, you should first test your waters before going any deeper and keep in mind certain important basics that will help perfect your trading skills.
The good news is that at CMC markets they have your back. We have compiled the following tips for successful forex trading for both beginners and experts out there.
- Clearly define your goals and choose a trading style that is compatible with the goals. Also, ensure your personality matches your style of trading
Before you begin trading, it is vital that you have an idea of what you want and how to achieve it. You should have clear goals and ensure that your trading method is able to help you achieve those goals.
How To Become A Successful Forex Trader | Investopedia
Every trading style requires a different approach and attitude in order to trade successfully.
It also has a different risk profile. For example, if you do not want to sleep with an open position in the market, then consider day trading.
Additionally, if you have funds that can benefit from the appreciation of trade after a certain period, then you should consider position trading.
No matter the style of trading you choose, ensure that it matches your personality as a lifestyle mismatch with leads to losses and stress.
- Choose a broker whom you are comfortable with and one who offers a trading platform that is suitable for your trading style.
Choosing a reputable broker is vital to successful trading. Choose one who offers a trading platform that enables you to do all the analysis you want. For example, if you want to trade off Fibonacci numbers, ensure that that the trading platform can draw Fibonacci lines.
Also, take the time to know the policies of the broker as well as carefully read his or her documentation.
- Choose a methodology and remain consistent
Before entering the market as a forex trader, you should have an idea of how you will make important decisions for executing the trades.
You should know the information you need in order to make the correct decision on whether to enter or exit a trade.
Some traders look at the underlying fundamentals of the economy or company and then use charts to determine the right time to execute a trade while others use technical analysis and only charts to time a trade.
Keep in mind that fundamentals drive the trend in the long term while chart patterns offer trading opportunities only for the short term.
Whichever methodology you choose, remain consistent and ensure the methodology is adaptive. The system should also keep up with the changing market.
- Choose a shorter time frame to time exit or entry and a longer time frame for direction analysis
Most traders get confused because of the contradictory information that occurs when looking at charts in separate time frames.
What shows as a buying signal on a weekly chart could show up as a sell signal on an intraday chart.
Therefore, when taking the basic trading direction from a weekly chart and using a daily chart to time entry, ensure you synchronize the two.
This means that if you get a buy signal from the weekly chart, wait until you get a buy signal from the daily chart. Keep the timing in sync.
- Focus on the trades and learn to love the small losses
After you have funded your account, an important thing to keep in mind is that your money is at risk.
Therefore, trading money should not be needed to pay bills for living. Consider it as vacation money, after the vacation, the money is spent and cannot be recovered.
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This prepares you psychologically to accept the small losses and enables you to focus on the trade rather than counting your equity constantly.
- Perform a weekend analysis
It is important to prepare in advance. During the weekend when the forex markets are closed, study the weekly charts and look for news or patterns that can affect your trade.
- Keep a printed record
A printed record of the trade is a great learning tool. Print out all the charts and write down the reasons for the trade including the fundamentals that influenced your decision.
Mark the charts with your exit and entry points, make relevant comments on the chart then file the records for future reference.
The above tips will help you make a structured approach to trading and will help you become a more refined forex trader.
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Category: Forex
