Trading Tips
If you have been a Forex trader for some time, the five trading tips listed below should be familiar to you. While there is no single tip that is a guarantee of success – otherwise everyone would be successful – these trading tips go a long way to saving you a ton of money on your trades. Experience will show that many new Forex traders lose money by failing to follow a few simple principles, namely:
Tip 1: Manage Your Money
The first and foremost trading tip that every Forex trader should live by is survival. Every trader inevitably has losing trades, but by going bust, you put yourself in a situation where it is no longer possible to have winning trades. For this reason, you have to do all that is possible to stay in the game.
Most new and consistently losing traders place all their focus on finding the most profitable trading strategy. While it is definitely important to have a great Forex trading strategy, having a solid system for managing your money as well as a rational and disciplined attitude to trading will make you a far better trader at the end of the day.
Tip 2: Always Have a Stop Loss in Place
The next trading tip focuses around stop loss. If you are familiar with the world of gambling, then you understand that the fold is the most powerful weapon that a professional poker player has. The same applies to Forex trading and the stop loss. A stop loss will let you determine the risk you are willing to take beforehand, down to the pip, so ALWAYS have a stop loss in place.
Really, there are only upsides to having a stop loss in place for all your Forex trades. It will force you to think about the point where you should consider your trade to be a failure. This is because many traders talk themselves into staying in a trade that is going bad by using all manners of irrational excuses.
Tip 3: Be Realistic
Barring an amazing stroke of luck, it is unreasonable to expect that you could close 80% of your Forex trades profitably or turn an initial investment of $500 into a profit of $10,000 in 6 months. If you get into currency trading with this kind of expectation, then you will only be setting yourself up for failure, frustration and disappointment.
The many trading tips out there will remind you to always try to examine your trades realistically from the very beginning. Find out what would be an acceptable percentage of winning trades which you can attain by using your experience and trading strategy. Ask yourself whether you have enough time to devote to trading and learning about the Forex market.
Tip 4: Talk to Other Forex Traders
For many new Forex traders, a frequently overlooked resource and source of vital information are other traders. It goes without saying that reading books and tutorials is essential. Books give you a solid foundation in trading within a short time and will give you a basis that you can build upon.
Although practice helps you to quickly get the hang of things, you will be surprised at how much insight you can gain on your trading strategy from other Forex traders. This is because these traders can give you an alternate perspective or a new way to use your strategy. Sign up to one or more of the many online Forex trading communities or start your own trading blog that will allow others to comment on your strategy and provide you with trading tips.
Tip 5: Check Your Emotions When Trading
The last tip in this series is probably the most important of them all. As we have said before, the Forex market is dynamic, exciting and fun, but it is essential that you do not get carried away. All successful Forex traders treat their trading as a business, not as a hobby.
Use the trading capital in your account to make business decisions – some will earn you a profit, while some will result in losses. It is as simple as that. However, as soon as you stop being rational and act emotionally, you will quickly start to stack up losses.