Currency exchange trading is easy enough, but making money with Forex it is another matter. Many people start out with big dreams only to suffer a resounding crash.
Here are 9 essentials tips that you must always keep in the back of your mind if you want to become a successful Forex trader.
You need to be realistic about your goals if you are going to hang on to any profits that you make. Forget about making huge amounts of money in a very short time: that is only possible if you take huge risks, which will see your profits wiped out as fast as they were made. Aim for a realistic profit goal and keep your trades very small while you are learning.
Nobody was born a successful forex trader, we all have to learn. Seek out good solid training in the basics of trading, including analyzing the market, risk management and psychological aspects. Training comes in many forms and at many prices from free to thousands of dollars. Price and quality are not necessarily closely related. Having said that, do not expect to get everything for free.
There is nothing wrong with asking for help when you need it. Just be sure you ask someone who can actually help you, and not a clueless beginner who likes to hang out in forums.
4. Good Trading Practices
Everybody seems to be searching for the perfect system, but there is no such thing. Systems do not work independently of our trading practices. If you have a sound plan, especially regarding risk management, stop losses and profit targets, you can make money with any profitable system.
But having a sound plan and a good system is not the whole story. You also need to develop trading discipline in order to apply your plan and your system. Making erratic decisions or acting on the spur of the moment is a recipe for disaster in currency exchange trading.
You may have to wait around a while for conditions to be right for you to open a trade. It is very tempting to jump in on something that looks good but does not fit your system. Develop patience so that you can avoid those random trades.
7. Stop Losses
Knowing how to cut your losses at the right moment is essential. Never hang on to a losing trade beyond a certain point which should be calculated before the trade is opened. It is a delicate matter finding the balance between having a stop loss that is triggered by small fluctuations, and holding onto your trades for so long that you make a huge loss. It will vary for each system, so make sure you get this right before you begin trading a new system for real.
It is important to remain calm under stress, because there will be a lot of that. Do not allow your trading to be motivated by fear, panic or dreams of huge profits.
Forget what you may see in ads about doubling your money every month. A profit goal of between 5 and 10% per month is an excellent return on any investment, and will keep you out of the most risky situations.
To conclude we’re going to add another tip. To be fair this is not something we should be pointing out as every trader should know and be doing this but we’ve seen our fair share of sloppy traders , so might as well include it …. No. 10
Finally, keep records of all of your trades. Yes it is tedious, but if your trading records are thorough they can allow you to take back control whenever things seem to be going wrong. Having results to analyze gives you a huge advantage in currency exchange trading.