Trading is an art that requires you to hone your skill through gaining the right knowledge, consistent practice, and discipline. Combining these three things can improve your chances of success in the financial market.
However, there are a lot of other factors that can determine whether you’d be successful in forex trading. For example, your trading platform is crucial to your success in this market. The MTrading platform is an excellent online trading tool that’ll boost your chances of success.
In this article, we will provide you with tips that will help improve your trading skills and execution as you engage in forex trading.
7 Tips to Ensure Success
There’s no master trick to achieving success in the forex market. However, there are crucial tips and guidelines that, if you adhere to, you’d have a greater chance of success in forex trading.
Below are seven critical tips for successful forex trading:
Choose a Reputable Broker and Trading Tool
Before deciding on your broker for trading the financial market, do not hesitate to engage in rigorous research, as this may play a critical role in determining your success. Ensure to know all the broker’s policies and how they approach their market. Also, ensure that the broker you choose abides by all the regulations guiding the forex market.
The trading tools your broker supports are also important. Ensure that ithey are ideal for making necessary analyses before starting a position. For instance, if you trade using Fibonacci retracement or crosshairs, ensure that your trading platform allows you to draw these objects on your chart easily. If otherwise, this may affect your outcome.
An example of a good trading platform that supports helpful trading tools is the Mtrading trading platform. The synergy between the MTrading software and MT4 app is particularly loved by traders.
Have a Defined Goal and Strategy
Setting a goal for trading the forex market is critical. You should have a clear picture of what you intend to achieve. The next thing is to design a suitable trading technique that can bring you closer to attaining your goals. Different traders have different strategies that work for them; you don’t have to be a copycat. You can always devise your method, provided you are sure it’d be successful and help you achieve your setout goals.
For instance, some traders only deal in short-term trades, that is, scalpers. These traders may make multiple transactions within a day. However, some traders hold on to a position for days, weeks, or even months in some cases – swing trading. Regardless of the trading method, each trader discussed is a forex trader and can reach their desired goal. Just ensure you understand yourself and find what works for you best.
Stick to Your Winning Trading Technique
Before your forex journey, you must have a trading technique, and after a couple of trades, you get the hang of it and choose to follow it. That said, you shouldn’t just switch from one trading method to another. Trust and remain consistent with that trading technique that works for you. Just ensure that the strategy is adaptive and able to keep up with the ever-dynamic forex market.
Calculate the Risk-Reward Ratio of Each Trade
Before each trade, determining the level of risk you’d be exposed to is critical. The risk-reward ratio helps you know if the trade you are venturing in has a higher chance of yielding profit in the long run. Ensure that the reward outweighs the risk; it’s a no-brainer.
It is quite easy to determine this. For instance, if the potential profit per trade is $500 and that of loss is $100. Therefore the risk-reward ratio is 1:4.
So, in a scenario where you place ten trades, four turn out to be profit, meaning the remaining six were losses.
- The four trades that yielded profit would amount to (4 x $500), equal to $2,000.
- The six trades that resulted in loss equals: (6 x $100) which is $600.
Therefore, in this example, the trader still earns even though only 60 percent of the trade turned out correct.
Set a Stop-Loss Order
The stop-loss order is a preset risk that a trader is willing to accept on a trade. This order helps to reduce excessive loss if a position fails you and you are unavailable to close such a position. Regardless of your certainty on a particular trade, it’s in your best interest to always set the stop-loss, especially if you are still a novice.
In addition, stop-loss is a critical forex risk management tool. So, traders are advised to ensure that it isn’t too wide. You don’t want to lose more than you can gain on a trade. Just ensure to set it at a reasonable unit to help minimize risk.
Furthermore, setting a stop loss helps you put your mind to rest, as you know you cannot lose more than a certain amount on a particular trade.
Risk Only What You Can Afford to Lose
First, you should know that every money you use to fund your forex account is at risk. That is, you shouldn’t trade with money that ought to be for your basic needs. If you feel you don’t have enough expendable cash, then perhaps you should keep saving till you have enough to fund your account. Don’t have the mindset that you are just borrowing particular money to trade and will return it after garnering profit. Because in the scenario where you lose the money, it may be traumatic or even result in severe financial wreckage.
Engage in Routine Weekend Analysis
The forex market closes at 4 pm EST every Friday. So you have the whole weekend to study weekly charts to check for patterns and news that could have improved your trade for the week. Perhaps you made some avoidable errors. Essentially, this will help you improve and become a better trader.
The guidelines we itemized above will help boost your chances of improving yourself as a trader. You should see trading the forex market as a business, more like a job and nothing less. The more you become proficient in trading, the greater your chances of success in the market.