Forex Trading Tips and Tricks
Here Are the Secrets to Successful Currency Trading
Forex Trading - kconners
Even though the mechanical process of forex trading is easy to understand, turning a profit by trading currencies can be difficult. Keeping these simple tips in mind may mean the difference between forex success and failure.
Develop and Adhere to a Forex Trading Strategy
Whether it's chart based, fundamental-based, or event-based, veteran currency traders apply the same proven strategy over and over again. Speculators know that no strategy works every single time; that's ok. They know it will work often enough to generate profits over time. Of course, not knowing which trades will payoff and which ones won't means that every 'signal' must be traded to ensure the profitable ones are acted upon.
Though not the only approach, a chart-based (or technical) strategy is the most popular method for picking currency trades. It's simple, indisputable, and most of all, its success is measurable over time.
Make No Exceptions
Developing a trading system is pointless if the trader uses discretion as to when those signals are taken. That 'hit and miss' approach is simply a sign that the forex trader is either (1) unconfident with the trading strategy, or (2) lacks discipline. The whole point of a system is that there is no room to make exceptions; exceptions seem to hurt more than help.
Don't Use Unnecessary Leverage Available With Forex Trading
If the goal is to earn a certain number of pips per day, or to create a certain percentage of profit per day on a certain account balance, reaching that goal may not require use of the maximum leverage available to a trader.
If it is required, then fine- use it. If a mini or micro contract trade will do the job instead of a full sized contract though (50 to 1 leverage versus 200 to 1 leverage, in some cases), then use those choices instead.
A consistent trade size is part of the well-defined strategy.
It makes little sense to risk three points on a trade that will only yield a three point win. Yet, many traders set a stop-loss of the same size as the target price.Understand the Reality of Risk and Reward with Forex Trading
Generally speaking, forex traders should aim for a risk-to-reward ratio of at least three to one (3:1). At that rate, the trader can lose on half his or her trades, but still generate a profit over time. The 3:1 ratio can be adjusted accordingly to adapt to certain strategies or success rates.
Trade During Peak Forex Hours
Even though the forex market is 'open' 24 hours per day, that doesn't mean it's liquid (active) every hour of every day. That illiquidity can create a surprising number of problems, particularly when it's time to exit a trade.
The more active currency trading hours are North America's 'business hours' (9 am to 5 pm EST), Eastern Asia's business hours, and the United Kingdom's business hours.
Currency Trading Isn't Personal
Above all else, forex traders should know that trading success is nothing to take personally. It's a business venture, and as with all business, there will be some successes and some failures. The key is simply staying in the game, which requires at least a strong defense... or stop-loss discipline.
Rather than lament or celebrate bad or great trades, each trade should simply be analyzed to determine why it worked or didn't work. That information can then be incorporated into the trader's strategy.
