Many people find trading the Forex market highly appealing, and for a good reason. While some traders make a living out of trading, others do it for self-fulfilment or to make some side profit.
Whatever the reason, all successful traders know the markets very well and no trader capitalizes because of pure luck. It’s important to understand that in order to make a profit as a Forex trader you’ll need to learn a great deal, and while it could take a lot of time and energy, it’s worth the trouble.
Here, we outline 3 simple principles that will help you be a successful Forex trader.
Set Attainable Goals
It’s quite a common issue that new traders set unrealistic goals and only focus on making high profit. The main problem here is that when they realize it’s not that easy, negative emotions kick in and they start to lose money.
Therefore, forget about impractical objectives and avoid focusing on profit only. Capitalizing on a few quick trades is highly improbable, and even worse, it could easily result in losing your initial investment.
Focusing on profit as an amateur trader will only bring emotional stress, which could lead to losing control and overtrading.
One of the most common mistakes. It’s no surprise that new traders join the market and begin trading without even understanding how the market works. Having a solid trading strategy is one thing and without knowing the market you want to trade, you’ll most likely end up losing your capital.
For instance, if you have a solid knowledge about how the Australian dollar behaves in different situations, it seems logical that you should trade that market instead of trading a market you don’t understand.
This step is quite simple – spend time and resources on educating yourself about the market you want to trade, watch webinars and so on.
Find a Consistent Methodology
This step is no less important than the ones above. Some traders prefer trading resistance over buying and selling breakouts, while most prefer to use technical indicators when trading, such as simple moving average (EMA), relative strength index (RSI), moving average convergence divergence (MACD).
Once you find a style that suits you, it’s important to test it to see if it brings consistent results. If you see that your methodology produces results more than 50% of the time, consider sticking to that system, even if the profits are small.
In any case, we advise you to spend more time familiarizing with charts and trading processes. For instance, you may spend some time testing a few strategies, instruments and time frames before you find a methodology that works for you.
There are only two types of trades – the one that brings profit and the one that causes loss. Every trade should be performed with extreme care and setting realistic goals, understanding the market and developing a consistent strategy will help you to move forward quickly and avoid losses.
Legendary investor Warren Buffet said there are only two rules in trading:
- Rule 1: Never lose money,
- Rule 2: Remember Rule 1.