We’ve all seen it before; the Instagram feeds of Forex traders peppered with snaps of luxurious cars, five-star vacations, and massive mansions. It’s easy to assume when looking from the outside in that this is all due to overnight success.
But, it takes more than that to succeed in Forex trading. The key to making real money on a consistent basis through Forex is to use tried and tested techniques and methods. When applied consistently, these can help you create wealth beyond your wildest dreams.
Here are some helpful tips to help get you started:
1. Know How to Limit Losses
One of the fundamentals of becoming a successful trader is to do your very best to minimize losses. While you can’t completely eliminate them, it is possible to avoid losses by operating in a way that allows you to prevent lost trades and reduce drawdowns. Your goal is to ensure that these risk factors don’t erode your capital to the point where you experience significant losses.
One way of doing this is to follow a predetermined plan with a clear exit strategy.
You can use a stop-loss order to prevent from making hasty emotion-fueled decisions when the market goes through its many fluctuations. A stop-loss order can be used in conjunction with “trailing” stops to chart a position in a way that protects you from unexpected reversals while leading to greater profits.
In addition to preventing losses, it’s also important to review your positions frequently to make sure that your trading capital is safe.
2. Be Careful When You Open a Position
At this point, you probably realize the importance of placing individual trade stops as an essential aspect of your trading strategy. Well, you should also consider a “maximum allowable loss” as part of maintaining your trading capital.
The rule of thumb is to trade only with amounts that you can afford to lose. This means you shouldn’t trade with money that should be reserved for your mortgage or rent, and you should always make sure that you have cash reserved to fall back on.
Consider the cash requirement relative to your position size to make sure that you’re not dipping into capital that’s meant for other purposes to fund active trades.
It’s also advisable at the start of each month to set what’s known as a “total loss limit”. Once you’ve reached this level, you can safely pause all trading activity until the next month.
You should stop trading altogether if you keep taking larger and larger losses.
Once you’re strong enough to start again, look at your trading strategy and tweak it to improve your performance. Use the best copy trading platforms to test the waters, and open a reserve account so that you can put away any and all profits that you make along the way.
3. Come Up with a Trading Strategy
Make sure you have a thorough understanding of the trading techniques that you’re using. Don’t be blind to the setbacks of your particular style and be flexible enough to apply changes when needed.
Always ensure that your trading positions are well-matched to your particular risk profile and carry adequate rewards as well. Avoid complicated methods that make you feel confused or out of whack.
You can’t make good decisions without knowing the mechanics of a specific technique. In fact, the best traders are those who are acutely aware of the shortcomings of their particular approach.
Avoid any strategy that directly exposes you to obvious risk, while acknowledging that every strategy comes with a certain level of risk and reward.
The most important thing is to stick with a collection of profitable methods that allow you to maximize each trade while matching with your market position.
4. Be Patient
Your first or opening trade needs to be well-thought-out. This means you must assess all potential variables and outcomes and time your initial entry just right. You’ll need to understand market trends and charting techniques to achieve this.
Every trader must understand this process as it brings you full circle with a successful entry and exit. If you struggle with overtrading, then you should go back to the drawing board and figure out what your Achilles’ heel is.
5. Stick to the Plan
Success in Forex trading invariably comes as a result of hard work, patience, and keen judgment.
The key is to not give up after a few losses, and to play the long game, using tried and tested methods that have been well researched.
If you’re just starting out as a trader, we hope you’ve found value in this article, and that you’ll use these tips on your journey to success.
As you can see, Forex trading is underpinned by pretty simple and straightforward principles that are easy to follow and practice.