As we approach the ending of an eventful 2021 , we are already making plans for the whole new trading year ahead -2022. Before you leap into your journey, we wanted to share some tips to ensure your success.
1. Manage Your Expectations
A newbie in the game would find it too easy to become enmeshed in going after profits. This is often the beginning of problems for most traders. Relentlessly going after profits come with an unhealthy level of anxiety, and this is almost guaranteed to cloud your sense of judgment and lead to mistakes that will turn into losses.
Thus, the first actionable tip we’ll give to you as you begin your Forex journey is to rid yourself of objectives that aren’t realistic. As a Forex trader, the prospect of becoming rich in just a few trading sessions is extremely unlikely. To put it plainly, if you go out there with a contrary mindset, you’re putting your capital at risk.
2. Define Your Trading Risk Profile
A proper understanding of the basic aspects of the market is quite necessary before rushing into commitments. Analyze the capital you have, check out testimonials by existing traders to have substantial knowledge of what to expect. Also, research the currency pairs and markets that currently hold your interest. If it doesn’t feel comfortable, take your money elsewhere. This is the same for any other market.
On the other hand, if you’re convinced your investment plan would do well in the Forex market, you’re all clear to go ahead. Just be sure to keep the following in mind:
Only invest what you can afford to lose.
Don’t put all your eggs in one basket. Make diversification your watchword. Ideally, you should not invest anything more than 20% of your total investment capital in any single market, no matter what.
Evaluate your risk profile: Is it moderate, aggressive, or conservative?
3. Select a Trading Strategy
The moment you decided to become a Forex trader, the next item on your list should be to develop a working strategy for your trades. This is not to say there are right and wrong ways to trade, no. But it is important to define a strategy and stick to it.
You will sometimes discover that a particular market strategy works well for a particular currency pair in a given market. Yet, the same strategy won’t work out well for the same currency pair in a different market.
To succeed as a Forex trader, you should make concrete attempts to align your trade strategy with your individual risk profile. Research trading tools and techniques and see how you can incorporate them into your strategy. Do a comprehensive study of market behavior and know how the trading industry operates.
Once a strategy has been put in place, don’t forget to carry out extensive tests to see how the market reacts to your strategy until you feel secure with that strategy. In our online trading academy we teach several strategies to engage in the financial market, but the primary strategy is always supply and demand.
4. Keep Your Emotions In Check
As a trader in the financial market, especially Forex traders, emotions are the worst enemy you can have. To achieve your goals, you must not only know the nitty-gritty of the market, but you must also have sufficient trust in your strategy and follow it to the letter.
A trader must have a clear head always, to make the right decisions. When trading, make sure you have a clear head and are making informed and rational decisions. You should also put measures in place to help keep your stress levels in check. We know full well this is easier said than done, but it is very important and could just be the thin line between a successful trader and an unsuccessful one.
If you are running low on capital, don’t attempt even to trade. The same goes for when you’re feeling overconfident and exuberant after a great streak of wins — restraining yourself from trading and ensure you’re aware and in control of your current mental state. Overconfidence is one of the leading causes of loss in the Forex market.
5. Use Stop Losses and Take Profits
Regardless of which trading strategy you choose to implement in your trade, always have a set stop loss in place when you trade. Both a stop loss and take profit allow you to set a pre-determined closing price of your trade. Even if you’re not currently monitoring your trading platform, your trade will immediately come to a close once it reaches the set price.
Among other benefits, a stop loss brings you a sense of peace and security, knowing that even if the market turns against you, you won’t lose any more than the limit you have set. As for the take profit, it makes sure that quit a trade as soon as the desired profit level is reached.
Having said that, it is essential to point out that a stop loss isn’t an infallible system. There are times when the market could act erratically, and price gaps would appear. When this occurs, the stop loss you set won’t be activated until the next time the price comes around the level once more. We, in our online trading academy refer to this trading phenomenon as “slippage.”
6. Keep Up With the Markets
Being current and updated with the market’s happenings is another essential tip to becoming a successful market trader. Basically, the financial market is determined by mostly current events, political happenings, or impending news of all these things. We normally refer to this as fundamental trading. Even as traders who make their trade using chart analysis of a market instrument, paying attention to the news is still very important. To put this in perspective, when utilizing your supply and demand trading strategy and seasonality indicate that you should execute a long trade, check the Forex calendar to ensure there are no upcoming events that could harm your trade. Even if your supply and demand trading strategy that works perfectly, pay attention to the economic calendar, especially interest rate announcements.
7. Overtrading Is Not An Advantage
Overtrading begins to set in when the trader begins to see the money-making opportunities where no such opportunity exists. Traders who go into the Forex market looking to make it big within a short time can be tempted into seeking too many opportunities to achieve their aims, thereby putting their capital at great risk.
Two common types of overtrading exist in the financial market:
Trading too frequently
Trading with a very high volume.
When your trade is too frequent, outside of scalping strategies, you’ll inevitably lose more money than you make.
Warren Buffet once delivered a speech titled “How To Stay Out Of Debt”. He emphasized the need to maintain strict discipline while investing in a market: “In investments, you have to wait until the opportunity is clear because the markets are not a game. In baseball, sometimes you have to swing at many balls that you don’t expect to hit, but this is not necessary in the financial markets.
There is no harm in waiting for more than a day for an opportunity to arise. You can simply wait until favorable price action arrives, and this shows that you really know what you are doing, and that is when you enter the game. You just need a couple of trades.”
A Forex trader would do well to apply this same principle into their Forex trading. The point here is clear: as a trader, you don’t necessarily need to make several trades to be successful.; you just need to make the right trades.
Traders trading on live accounts must put in place a well-researched and tested strategy with particular emphasis on trade entry and exit. This will help you stay on track and avoid impulse trades.
On the other hand, overtrading that is a consequence of trading with excessive volume is often blamed on leverage.
But how true is this?
As we stated earlier, Forex brokers offer significant leverage in their trading accounts which gives traders the opportunity of earning higher profits from smaller investments. This opens up the market to more people, resulting in a multiplying effect on the number of traders trading on their platforms.
While this is what is obtainable on paper, the reality remains that high leverage is constantly abused by amateur traders who are often found trying to milk all potential profits from their Forex trade. In trying to do this, they mostly end up multiplying their losses.
To set things straight, high leverage in itself isn’t the prime tool for failure. It’s just a tool that allows the trader to operate with larger trading volumes, which often results in the trades ending up with bigger margins. This is potentially a double-edged sword. Your profits will be amplified if the market moves to your advantage. If the opposite is the case, your losses are amplified.
When you trade in an excessively high volume, your account becomes more exposed to margin calls. To avoid overtrading in its entirety, you must completely understand the concept of leverage.
8. Losses Are Inevitable
Some traders, especially newbies, equate being a success in trading to winning every single trade you engage in. That’s not even remotely possible; you won’t close all your trades with profits. Some professional traders may have consistent wins but none can produce a trading statement without a single loss in it. Proof of success for any Forex trader should be measured ultimately by how much your wins outnumber your losses.
That’s why you should not lose hope when you lose out on a trade. Even the most accomplished traders who have spent decades in the industry will confess to having as low as 40% or less profit in all their trades, and some even report to have lower.
The simple trick to becoming successful is to make winning trades that are substantial enough to cover for any losses you accrue and maintain a net positive. It requires a lot of mental strength to admit mistakes in decision making and close a trade with a minor early loss. Likewise, it also takes much strength to trust in oneself and not close a trade with profits too soon.
9. Formulate A Trading Plan
You need to have a strict trading plan that caters to most of your trading activity. This will help lower the possibility of being severely hit by unpredictable market movements.
Most traders develop bad trading habits too early into their journey. A prime example is the aforementioned overtrading in which a trader gets lucky and keep trading until their account is overdrawn.
On other occasions, sheer luck or chance can help draw some excellent trades. The unsuspecting trader does not know it is luck and continues in his habit until it becomes too late.
For traders who rely on luck, it will benefit them to know that luck always runs out; and when it does, losses arise. Therefore positive trading habits are quite essential to continued success as a trader in the financial market.
10. Choosing the Right Premium Signal Provider
The part of making the right choice of signal provider might have come last in this article, but it is simply one of the most essential tips. You need a transparent and experienced signal provider to guide you to trade. If you can choose the right signal provider, you’ll be able to focus your attention on placing trades and achieving excellent trading goals.
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