While Forex trading can be a challenging and complicated process with a steep learning curve, it doesn’t mean that you can’t follow some simple but essential rules to boost your trading results.
Of course, these tips are extremely important for anyone starting out in Forex Trading , but many experienced traders might find them helpful too!
Stick with the plan
Having a solid trading strategy is a must for any successful trader, and so is preparing and executing a trading plan for every trade. Once you have formulated a trading strategy, you should resist the urge to switch strategies the moment things aren’t trending positively.
This is the kind of inconsistency that many beginners (and even some seasoned traders) are guilty of.
You see, the whole idea of trading is that there will always be rises and falls in the market.
To be successful, it’s not about being psychic and predicting every single market shift, but sticking with a trading strategy that can produce decent risk/reward and win/loss ratios in the long run, and riding it out for a bit to see whether they improve as market environments shift.
What’s more, as trading strategies require a period of time to reflect their actual performance, your chosen strategy should always be tested with a couple of trades to see if it performs well in the current market.
For instance, with a strategy that has a 60% win/loss ratio, you could very well begin with several losing trades in a row. But to realize it’s true potential, you’ll need to make more trades and stay confident in your strategy.
However, if you are constantly switching strategies immediately after any slow starts, you'll never reach your trading strategy’s true potential.
Manage Your Risk Levels
To test any trading strategy, you must make a number of trades. This means that you should limit risk in each trade in order to test various trading strategies. Simply put, if you risk just 1% of your account in every trade, it will take 100 losing trades in a row to run out of funds, which is highly unlikely to happen.
That being said, don’t get too greedy during the testing phase and choose modest risk levels for your trades. Always test different strategies and focus on the execution of each trade. When you‘ve determined what works best in the current market environment, you are welcome to increase your risk level.
Take Time to Analyze
Successful traders always put in the effort to analyze their trades regularly. This attention to detail not only allows them to learn what works well in the current market environment, but crucially, what isn’t working.
This means that you should avoid going with your “gut feeling” which tends to lead to haphazard results. Rather, it’s advisable to stick with your planned strategy for consistency.
Doing so allows you to analyze its performance over time and understand whether your strategy delivers the expected win/loss and risk/reward ratios.
Once you are satisfied with the results, then stick with your current strategy and focus on execution. However, if the results aren’t satisfactory, feel free to tweak your strategy further or switch to a new one.
As for tweaking your existing strategy, we suggest making a single change instead of anything drastic. This allows you to evaluate the impact of this change and pinpoint why it worked or didn’t work.
On the other hand, making drastic changes will not allow you to gain any insight into what went wrong.
Narrow Your Focus, then Expand Your Watchlist
Forex markets are fast paced and ever-changing, and it can be challenging to track them all if you have just started trading. That’s why we recommend starting off by tracking a limited number of instruments in order to keep track of the entry and exit points of your strategy.
After testing your strategy on several instruments, you can then choose to add more pairs to your watchlist and evaluate whether the same strategy works with them.
Along the way, you'll learn what’s the most effective strategy for every pair you trade, allowing you to build up several sets of strategies to choose from in the long term as the markets evolve.
Stay Alert for Change
In trading, there’s a saying that “past performances do not guarantee future results”, and this is especially true as what works well today may fall flat tomorrow.
On the other hand, a strategy that results in poor performance in the current market environment may soon turn into a high performing one in the coming days or weeks.
By analyzing your trades and keeping close track of your current trading strategy results, you won’t be caught by the surprise of inevitable change.
This means that even if your previous strategy stops being profitable, you'll already have in place a new strategy that is better suited for the existing market environment and always be ready to profit!
Now that you’ve learned the essentials to successful trading, why not put it all to practice with a stable, secure and proven platform? Forex4you is a leading broker that offers access to more than 150 tradable instruments. Register your account with a trusted platform today!
Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand Forex4you’s Risk Disclosure.
