The realm of Forex is a complex one, especially with countless international players attempting to conquer it. As it the biggest and most liquid marketplace in the world, Forex enjoys an average daily trading magnitude of over $5 trillion. Given the massive volume of complicated transactions conducted by a multitude of actors from different corners of the globe, who would not mind some extra tips to master Forex trading? We sure wouldn’t!
Own Your Forex Trading Policy
Identify your goals and the purpose of your operation on the Forex circuit. What is it that you desire to achieve by trading? Will you engage in Forex trade on a part time basis? Will it be your primary source of income? How much risk are you prepared to take and for what time period? It is essential that you outline your objectives succinctly and clearly.
It will serve as a guiding framework where you will select your trading plan and policy. Yes, we should listen to our “inner voice” from time to time or rely on our instincts as well. However, it is better to be equipped in the Forex trading field as there are countless variables at play. Have a solid approach that you test rigorously and amend upon requirement.
Have A Positive Mindset
Do you believe in the power of positive thinking? We sure do! Our advice is to begin your morning with a warm cup of coffee or tea (whatever you prefer), take a few deep breaths and go to your happy place. Yoga or meditation are effective in relaxing one’s mind as well. Then, commence your Forex trading journey by moulding your mind to function within the borders of optimism. It will strengthen your skills in stress management.
Write a Trading Diary
Forex trading gurus find it useful to maintain a diary where they pen all their trading records. This is a highly recommended tool as it is a register of all your transactions and serves as a source of guidance for future deals. Capture all associated factors such as the time, daily opening range, market opening and closing time as well as the entry and exit conditions for each trade. If you have a favourable trade, you can analyse the criteria that made it a success. Similarly, you can review losing trades and strive to avoid repetition.
Trading is more of an art than a science. To perfect any craft form, practice makes perfect. It is essential to maintain a disciplined approach towards trading to truly master it.
Monitor Price Performance
Price action refers to the flow and movement of prices on the Forex avenue. It is crucial to study it consistently and effectively as it is a great indicator of the direction the market is going in. As a trader, you can appraise the market conditions and make an educated estimate about the trade in question.
The Elliott Wave Theory will definitely come in handy and will help you differentiate between both impulse and corrective waves. Established by Ralph Nelson Elliot in the 1920s, states that crowd psychology creates the ebb and flow of patterns. He believed that the cyclical trends were a direct creation of investors’ rejoinders to external aspects. Elliot discovered that the swings followed a repetitive inclination which could be further sub-categorized into progressions that he labelled as “waves”.
Look After Your Risk
Every time you trade, an element of risk is involved. Hence, it is imperative that you ascertain the degree of risk you are not only willing-yet can afford to undertake. Managing such risks will only benefit you in the long term as you navigate your way through. Holding onto your capital will allow you to spread your risks over a longer period of time as well.
Have A Strong Code of Work Ethics
To proceed and advance in the Forex trading game, you must possess a strong work ethic and be willing to stick to it. A lot of back end work has to be conducted when becoming a regular player on the Forex field. It could involve levelling new trading strategies, back testing systems, or amending your trades as per market changes.
Follow A Mentor
Surround yourself with knowledgeable, experienced Forex traders whom you can learn from. Observe and understand the thought process they put in for every trade.
Embrace Your Losses
Do not despair if you make trading losses as it is all part of the game. Our advice is to take it as a learning curve and take what you can from it. This is where your trading journal (a tip shared earlier in this article) will play a vital role as you can go back to understand what conditions existed when you entered the trade.
Do Your Research
Perform an economic, political and social analysis of the world’s climate to assess the direction the market may open in. Are international markets moving in an upward or downward direction? Has there been any economic event that will affect Forex trading? Decide whether you will take a risk and wait to trade till economic reports are issued or after. It is recommended to be patient and wait for the report to be released before investing in the market. A little caution never hurt anyone!
The market seems up and you are in raking in those winnings! No matter how tempting it appears, do not over-trade. Take a step back and review your current strategy. Is your time window sufficient? Or is your risk too high? It’s possible that you are doing both.
Embark on a journey of self awareness as it will only make you a stronger trader. Understanding the motivation and rationale behind your choices in trades will enable you to make better decisions. You will be able to foresee how it impacts your perspective of the financial markets and how any pre-existing notions may influence your decisions as well.