Forex Trading Secrets – 5 Tips For Profitable Trading

  • 2 years   ago

FOREX trading involves the exchange of currencies in the international currency market. It is a common choice for novice traders. 

 

 

FOREX Trading is popular because:

1. FOREX Trading has very low barriers to entry

2. FOREX Trading has very high levels of daily liquidity

3. The market is open 24 hours a day, seven days a week

4. You can trade FOREX even if you have a full-time job. 

FOREX offers traders the potential to make uncapped returns, and many traders – including novices – do indeed make impressive consistent returns. However, FOREX trading is by no means easy nor a sure thing.

We've put together several tips and rules you should follow to help you have a profitable FOREX trading career. 

Here are Some Key Pointers 

Only Trade With Money You Can Afford to Lose

Trading is undoubtedly a stressful undertaking, for novices and seasoned investors, though the extent varies. However, the worst thing is trading with money that you need for monthly expenses and can't afford to lose. 

Risking money you need amplifies your stress levels and, therefore, impairs your judgment. Not surprisingly, this often leads to costly trades, and the predicament continues to compound itself from there on.

Instead, you should only ever trade with funds that you can afford to lose without hurting your standard of living or without the risk of putting you in financial turmoil. This shouldn't be an issue, as most online trading platforms and brokers have very low deposit requirements. 

You can open an account with just $50 – sometimes even less – so there's no need to be over-eager and take on too much risk from the get-go. 

Pick The Right Broker For You

With so many brokers and trading platforms out there today, it can be a bit of a minefield finding the right one for you. Variety is good, but focussing on trading platforms that focus on their FOREX offerings is advisable and narrows down the selection process for you. 

It's also essential to bear in mind that the largest and most established platforms aren't always the best. 

Smaller trading platforms may offer tighter spreads (lower trading fees) and other benefits, as they try to entice more traders to use their platform as opposed to larger ones that already have the lion's share of the market. 

Regulation is Another Key Factor

When trading with on a platform or through a broker, you are essentially handing over your money to them, so you must make sure a trusted financial regulator regulates them and segregate clients' funds properly. 

Have (and Follow) a Strategy

Before even applying for a FOREX trading account, you should make sure you fully understand the market and have a clear trading strategy in place. 

Your strategy should be comprehensive detailing how you plan to place your trades, your entry and exit points, money management (how much capital you commit per trade), stop losses, and so on.

All of this will prove invaluable throughout your trading journey and puts the odds in your favor. 

You must follow your comprehensive trading and money management strategy very carefully. It's advisable to tweak your strategy as you go, and your bankroll grows. But deviating from it for no good reason will lead to trouble in most cases and hurt your long-term profitability. Be disciplined in your approach, and you should reap the rewards of your hard work!

Use a Demo Account First

It's easy to give in to the temptation to trade with real money straight away, so you can start generating a profit as soon as possible. However, this is not advisable and is likely to cost you money and hinder your long-term profitability.

Instead, it would help if you took advantage of the fact most trading platforms offer demo accounts and use them for paper trading. Demo accounts allow you to become familiar with the trading platform you'll be using. Demo accounts also allow you to test out and develop trading strategies, all in market conditions that follow the real world. 

However, bear in mind that demo trading doesn't quite replicate real trading, due to the psychological element. In actual trading, your emotional discipline will be tested far more than in paper trading, as real money is on the line. 

Nevertheless, demo trading is a vital tool that should be utilized by all traders, particularly novices, and even experienced traders who want to test out a new strategy. 

Focus On a Few Currency Pairs

With trading platforms offering access to an abundance of currency pairs – and other assets outside the FOREX market, such as commodities and equities – it is easy to be tempted to trade a different currency pair or asset class each day. 

Most would agree that this is counter-productive, particularly in the long-run. Instead, focus on just a few currency pairs – perhaps two or three – and follow their price movements, relevant news, and pertinent analysts' comments very carefully. 

Following a simple plan should be manageable, and trading only a handful of currency pairs means you should have enough scope to identify suitable trading opportunities. 

If no opportunities which suit your strategy present themselves on a given day, it's crucial you don't just enter the market haphazardly. Carelessness will often cost you money. Even if you do get lucky, it's certainly not the basis for a long-term FOREX trading strategy that can deliver consistent returns for you. 

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