The Best Forex Trading Tricks and Tips (Become a Better Trader Overnight!)
Getting into forex trading can be exciting. It is a fairly unique kind of trading, and high-energy market by nature, making it fairly simple to get caught up in. With that said, as with any other type of investment or financial management, forex requires to be approached strategically. To assist you with your strategy, if you are a true beginner, here are things you need to know before you get started.
Know yourself and your limits
Trading is about understanding the market, which does take some time to figure out. But equally essential is knowing yourself. How much money are you inclined to invest and potentially lose? You will need to consider how secure your other investments are, what your capital is, and how much you can afford to say goodbye to if things do not go as expected. Getting to know yourself better can be useful in your trading. You can also figure out the worst-case scenario; that is the worst that could happen and how you can deal with it. This will help you eliminate anxiety.
Have a plan for trading and stick to it
Making money can be very addictive, mainly if you are on a winning streak. It can be tempting to desert your more conservative methodology and be a little more ambitious with your trading than initially planned. It is a good thing to stick to your plan: high chances are you designed it when you were feeling level headed and influenced by emotions, so there is a chance that good logic tucked into it. Work on a plan in advance and stick to it.
Forex pairs differently
Note that each currency pair has unique dynamics. As you might know, every trade in the forex market involves a pair of currencies (like NZD/USD). However, different pairs have distinct histories and tendencies that are essential to study up on and understand before you become too busy in the industry. In a sense, you can liken this to researching a stock before you invest in it. It is always useful to understand the history and be able to identify patterns.
This is trading and not an investment
Quite often, the terms investing and trading are used interchangeably, and to point, in casual conversation, it is reasonable enough. Nonetheless, there is a difference, and it is worth understanding if you are getting into forex. The investment focuses on long-term benefits, with the approach typically being to purchase and hold over time. On the other hand, trading implies a more active approach, with regular transactions made in pursuit of numerous short-term gains. Strictly speaking, there is no reason one could invest in a currency pair, and hold onto it for the long term. Undoubtedly, many people do just that. More commonly, though, the market of forex is one for more regular traders- especially given the tendency of currency values to fluctuate regularly, however, within comparatively small windows of value.
The first currency of the pair is usually the one upon which your trading quote is based
For example, if you choose the pair EUR/USD and think that the dollar will fall against the Euro, you will bet long on the Euro; however, if you believe the dollar will increase against the Euro, you will be short on the Euro.
Start with a demo account
It is always good to first use a virtual demo account to practice with since most of them you get to practice with virtual currencies in the live environments enabling you to watch the trends and the trade without losing your money.
Determine entry and exit points
Most traders get confused by conflicting data that occurs when looking at charts in different time frames. What shows up as a purchasing opportunity on a weekly chart can show up as a sell signal on an intraday chart. Thus, if you are taking your basic trading direction from a weekly chart and utilizing a daily chart to time entry, make sure you synchronize the two. If the weekly chart is providing you a buy indicator, wait till the daily chart also confirms a buy signal. Keep your timing in sync.
Focus on small losses
After you have funded your account, the most significant thing to remember is your money is at risk. Thus, your money should not be required for regular living expenses. Think of your trading funds like vacation money. After the vacation is over, you have spent all your money. Have the same attitude toward forex trading. This will psychologically prepare you to undertake small losses, which is key to managing your risk. By concentrating on your trades and undertaking small losses instead of constantly counting your equity, you will be much more successful.
Start small, grow organically
You will possibly have to invest a decent amount to get started; however, once you have, try to allow your account to grow organically, from trades from returns. If you are able to increase your account size by profits, that is great; however, if your account is not increasing, there is no sense in adding more funds. Let it increase by way of your hard work, that way if things do not go as you planned you would be minimizing your losses from the start
Be specific in the beginning
When you are starting to trade, it can be tempting to choose a few different currencies; however, you will do much better if you focus on a currency pair until you understand the market better. Focusing from the beginning and keeping things as simple as possible will let you get a better grip on the industry, resulting in better revenues and more income.
Forex trading attitude
A trader’s behavior is an integral part of the trading process, and therefore your mindset and attitude should reflect the following attributes:
- Patience: Sometimes, things will take time, and you have to be prepared to hold and wait until there is a good chance for a trade. This can be frustrating for some, and downright impossible for other people, so be mindful of your personality limits before deciding to move forward with forex trading.
- Discipline: Discipline is the ability to be patient- rest on your hands until your system triggers an action point. Sometimes, the price action will not reach your anticipated price point. At this time, you should have the discipline to believe in your system and not second-guess it. Discipline is also the capability to pull the trigger when your system signals to do so. This is particularly true when stopping losses.
- Objectivity: Objectivity or emotional detachment is also based on the reliability of your methodology or system. If you have a system that offers entry and exit levels that you find reliable, you do not need to become emotional or be influenced by pundits’ opinions. Your system should be dependable enough so that you can be assertive in acting on its signals.
- Realistic expectations: Even if the market can sometimes make a much bigger move than you expect, being practical means that you cannot anticipate to invest $250 in your trading account and make $1,000 per trade. Even though there is nothing like a safe trading time frame, a short-term mindset might involve smaller risks as long as the trader exercises discipline in choosing trades. This is also called the trade-off between the reward and the risk.
Perform weekend analysis
Ensure you study the weekly charts to look for patterns and news that could affect your trade on weekends when the markets are dissolved. Maybe a pattern is making a double top, and the news and pundits are suggesting a market reversal. This is a sort of reflexivity where the pattern can be prompting the pundits, who then reinforce the pattern. You will make your best plans, in the cool light of objectivity. Hold-up for your setups and learn to be patient and disciplined.
Keep a printed record
A printed report is an excellent learning tool. Print out a chart and note down all the reasons why you made the trade, including the fundamentals that sway your decisions. Then mark the chart with your entry and your exit points. Make any relevant comments on the charts, inclusive of the emotional reasons for taking action. Were you too greedy? Did you panic? Or were you full of anxiety? Only when you can objectify your trades will you develop the mental discipline and control to execute concerning your system instead of your emotions and habits.
Forex trading is an excellent hobby for some people, an extra source of income for many, and lately, it is becoming a way that many people make their entire livelihood. How far you can take it is based on your skills and goals; however, if you have been thinking about trading for a while, it can be a great time to get started.