It’s all about strategy
All good forex traders will have a strategy. There are many different trading strategies to choose from. For example, if you don’t have much time to dedicate to trading, you may opt to become a positional trader. If you have an abundance of time and like to watch the markets, a scalper may be the way forward for you. Alternatively, you could be looking at being a swing trader. Regardless of which you decide, THE most important thing is that you feel comfortable using the strategy that you develop.
Developing a strategy requires time, patience and practise. It is often a achieved through a process of trial and error and unless you want to lose lots of money early on, it is advisable to do this trial and error development of your strategy on a demo account.
Once you have established your trading strategy and taken the plunge onto a live account, here are a few pointers to keep in mind to help you on the road to successful trading:
- Prepare yourself a trading plan and ALWAYS use it. Under no circumstances should you find yourself trading without adhering to your plan – this is when you will fail.
- NEVER risk more than 2% of the capital that you have available to trade with on your account. Moving beyond this means you are under greater risk of changing your behaviour towards your trading. Furthermore, you are much more likely to have your trade closed out.
- NEVER let your emotions do the trading. All aspect of the trade should be decided in your plan beforehand. If you start taking decisions regarding the trade whilst it is running, you will almost certainly be trading your emotions. This will lead to losses.
- ALWAYS set a stop loss – if you don’t’ you are setting yourself up for failure. Failing to implement a risk management strategy will almost certainly lead to failure.
- There is no need to be afraid of losses, every trader has them. You will have many, many losses across your trading life have. The key is obviously to try to achieve more profitable trades or better put try to run your profits for longer and cut the losing ones. This means you may actually have a greater number of losing trades, however as the losses are kept small and in check with stop losses, there should be no wipe-out losses. Your profits you should then run.
- NEVER trade to compensate for a losing trade. This is one of the worst errors in trading. The set up will almost certainly be incorrect, your trading psychology will be all wrong and it will be an emotional trade.
Learn from your mistakes – of course you will make mistakes, we are all human. The most important point here is to know what went wrong and how you can correct it, to prevent the same error happening again.