A certain amount of mystique will always surround trading strategies in the Forex market, however if you’re new to trading and are looking for successful strategies that you can begin to implement into your Forex trades, it’s important to understand that there is no single, magical formula for trading successfully.
One example is to think of the Forex markets as being the ocean, and you are the surfer – in order to surf successfully, a lot of patience, talent, practice, proper equipment and mindfulness of your surroundings are essential. If you were surfing, would you venture out into shark infested waters? Hopefully not – and you should never dive head first into Forex trading either without having some idea of what you are doing and one or two strategies that you can put to work.
Your attitude to trading in the Forex market should be similar to the attitude of a surfer – like the majority of skill sets, good trading skills are developed over time with a combination of talent, research and practice. By combining thorough analysis with the implementation of effective methods and strategies, you will begin to see more success. Listed below are three excellent strategies that have been tried and tested by the most successful of Forex traders, and using these strategies when you trade will help you to gain better returns and start to see your investments grow.
The Approach Strategy
Because the Forex market is so volatile, the way you approach a trade is of vital importance. It’s important that you recognise the value of correct preparation before you even begin to start trading, and the first step is for you to align your personal goals and attitude with the markets and instruments that you can relate to comfortably.
Good preparation and determining where you are comfortable and knowledgeable is not just good practice for trading in the Forex market; it will serve you well in any other market that you decide to trade in. When you approach trading, you should begin by assessing the following components:
- Time Frame: The time frame that you decide to trade off will depend on your levels of comfort and how much risk you are willing to take on. For example, if you do not want to run the risk of overnight trading, you will be more comfortable trading off a five-minute chart. On the other hand, if you’re comfortable with a higher level of risk, choosing weekly charts shows a willingness and preparation to see some days that may go contrary to your position.
- Methodology: Once you have decided on a time frame, you will need to consider which system or method you are going to use when trading. Traders use a variety of different methods, and the most successful traders will always test any new systems that they begin to use first to ensure that it provides them with the returns that they need and is a success. Test your method before you make it your go-to system, and if it has a 50% or more success rate most of the time, the best decision would be to continue to use it.
Your Attitude
When it comes to trading in the Forex market, the strategies that you use concerning your attitude to trading are of utmost importance. Because of the high leverage levels in the Forex market you are in with more of a chance of earning big returns, however this can also go the opposite way, and there’s always the potential risk of your trading account being completely depleted. For this reason alone, your attitude when you trade should be something that you take very seriously.
- Patience: The best traders have tons of patience, as they know exactly what to expect from the tried and tested system that they have put in place. Once you have worked out what to expect from your system, you will need to have the patience to wait for the price to reach the desired levels that signify your entry or exit.
- Objectivity: Any successful trader will tell you that it is crucial you are objective with your trades. Becoming too emotionally involved or overly attached can make you become desperate, and your feelings about the success of a trade can hinder your attitude. Never have too high expectations – if your system indicates entry at a certain level but the market never reaches it, simply move on the next opportunity. Saving money as a business owner is paramount for success. Trading is a business so you need to treat it properly.
Discipline
In the world of Forex trading, discipline is key. Sometimes, the price action may not reach the price point that you have anticipated, and this is when you will need to be disciplined enough to sit on your hands and wait. If you make a loss, you need to be disciplined enough to know when to admit defeat and try again, rather than frantically trying to earn back your losses.
Good Management
Properly managing your trades is an effective and necessary strategy that should be implemented from the moment that you begin to trade. Since there is no thing as a 100% profitable trade, even the most profitable of systems will still have some profit to loss ratio. The difference between a large and small loss percentage is in how the trades are managed.
- Risk Control: The basis of successful trading is primarily with risk control. If necessary, you should take losses quickly and often, and try to get your trade in the right direction straight out of the gate. Cut off and try again if it backs off – it is often on the second or third attempt that your trade moves in the right direction immediately. Good risk control is a practice that requires discipline and patience, but perfecting this strategy will enable you to be profitable at best and break even at worst.
Images: ” Forex Trading Concept. Currency exchange in the backround /Shutterstock.com“
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