Having complete knowledge about Forex doesn’t ensure success as a trader. You have to get wet to learn swimming. Further, fitness and continuous practice could not be set aside to make a person, a good swimmer. Forex also warrants practice and persistence. Furthermore, you need a trading plan to be successful as occasional visit to the pool helps you win nothing.
Stepping in as and when and trying your luck in Forex, would not give you any profit and you might end up as a loser. Even if you have gained some money, it would be a factor of luck. Instead of doing Forex as a gambling, you could do it as a business , if you plan your actions perfectly.
1. Demo Trades
Avoid using your real currency before you gain confidence in Forex trading. Testing the Forex waters with demo trading is the right choice as it saves you from initial loss and probably from early exit from the Forex trade itself. It helps you to know the basics of trading and lets you gain some confidence about the process of trading. Demo trading for a period is good as it helps you to assesses your skill. (Before moving on to live trade, read this article)
2. Be Fit
Emotional strength is very much necessary to survive in Forex the market as it easily plunges you into a highly stressful vortex. You should choose the type of trading plan and style that best suits your personality. Random decisions results in failure which would be the result of anxiety, anger, lack of rest or proper sleep. So, being fit is an important factor to emerge as a successful trader.
3. Fix Your Limits
Allocating a certain percentage of your income to trade in the Forex market is a wise thing instead of risking all your income or borrowing in the hope of good returns. During trading, fixing a certain percentage of your allocated money to trading as an acceptable loss is one of the winning factors as it put brakes to your over enthusiasm and prevents further losses.
4. Profit Target
In a proper trading plan as like fixing your bearable loss, fixing your target to earn profit is also, a must to do in the list. Every businessman works for profit and a disciplined businessman always has certain goals to achieve.You as a Forex trader should also set your targets and it could be daily, weekly, monthly or yearly targets. Generally, many traders fix the potential profit should be at least three times the risk. Setting a percentage of your portfolio as a profit target and reassessing them regularly is an important factor in the Forex trading plan.
5. Be Informed
Forex is a 24 hours global market which is affected by various economic, political and geological factors. Lot of online news feeds, journals and business magazines are available which give you proper information on the adverse effect of these events on your trade. A well-informed trader always analyzes the situations before entering the trade. Analyzing the currency pairs and the happenings of another economic zone should have top most priority and here also, information is wealth.
6. Tune Your Trading System
Choose your trading system and program wisely. Mark your support and resistance levels and let the system alert you about the entry and exit signals set by you. Make your trading system as a clear indicator with no distractions and use visual and auditory signals clearly. (Check out our article on how to backtest and fine tune your trading system)
7. Plan Your Exit
Generally, traders pay more attention to buy signals than to sell signals. Fearing the loss, many traders don’t want to sell which would result in further loss. Even successful traders end up with more losing trades than the winning trades. But with the practice of limiting losses and managing the money, they make profit.
Plan ahead your exit points which usually are stop loss point and take profit point. Don’t let any emotional stress to take over which hamper your decision making.
8. Plan Your Entry
Traders generally buy signals, if the profit seems to be three times more than their risk. Today many systems are more reliable than the humans as computers make decisions based on analysis and not on emotions. Today most people rely on systems and make good trades.
9. Have Your Own Journal
Keeping record of all your actions as a trader is a good practice which is a sign of a successful trader. In due course, it’ll act as a guide to make right decisions.
10. Be a Critique
At the end of the day, thoroughly review your trade and be a strict critique. It will help you a lot to grow as a trader as everything percolates deep into your mind. And never get trapped into the forex misconceptions.
Are you a retail trader trying to trade from home? Get to know How to Start Forex Trading From Home.