In the last few years, Forex trading has grown by leaps and bounds courtesy its expansion on the internet. What used to be a side trading strategy by people who dealt in stocks is today conducted by millions of people who conduct trades daily.
Many people today from a variety of backgrounds are easily attracted to Forex trading, primarily due to the low investment cost and promise of swift results. They have, however, also found out that it is much more difficult than it seems. This is due to the fact that proper Forex trading strategy is not based on short term gain, but on long term gains.
The following are some time-proven and time-tested tips that will aid you in creating a sound Forex trading strategy that can help you deliver results:-
REMEMBER THE FACT THAT FOREX TRADING BUILDS WEALTH IN THE LONG RUN:
Forex is no “get rich quick” scheme. Successful Forex trading is in fact an art whose strategy is based upon risking some money everyday and not trying to “win big” from some trades and get it over with. The best and most successful Forex strategy comes from careful weighing of risks and rewards. You must, therefore, make sure that you do not end up risk more than you can afford to lose.
USE YOUR HEAD, NOT YOUR HEART:
As much as a “feeling” and “gut instinct” sounds authentic, it is in reality simply a response based on emotion which has no actual bearing on the outcome of the trade. Those who successfully conduct Forex trades base their strategy on current events, trends while and research and don’t let their emotions get in the way. After all, good feeling is no real basis on which anyone should risk their hard-earned money.
USE LESS LEVERAGE:
One of the best features of Forex trading strategy is the ability to trade on margins. As a matter of fact, many successful Forex trades have a high degree of leverage, which implies that a very small amount of money is actually put up front. While winning such a trade will bring you high dividends, losing it will end up in you owing much more than the initial investment. It is best to therefore use less leverage on your trades.
GIVE A SECOND THOUGHT TO ALL YOUR DECISIONS:
Plan as you might, there are always times when even a single random event will give you results that are far from what you expect. That does not imply, however, that you make hasty decisions and ignore even the existence of other possibilities. Never make decisions that are hasty or are simply based upon your “gut feeling” – and always make sure to give a second thought to every decision you make.
DEVELOP AN UNDERSTANDING AND INSIGHT OF THE MARKET:
Any sound Forex trading plan always has a sound understanding of market and market behavior. As a forex trader, you should always have an understanding of the market and an insight of how it generally reacts to daily situations. While many do argue that “history never repeats” (and it is even true to some extent), it is nonetheless a good thing to know about the exact conditions that helped you conduct a favorable trade.
USE STOP LOSSES LIBERALLY:
The main reason stop losses exist is to deter traders from spending too much. Even when the going is rough, many Forex traders falsely believe that things will surely turn better in the end, and all the losses will be recovered. By entering a pre-set amount at which all transactions should be stopped, even the worst trade will cost lesser than the original investment.
MAINTAIN A CHECKLIST:
When it comes to successful Forex trading, it’s the little things that always matter. It is best, therefore, that you keep a checklist of your winning strategy, where you can mark off each step once it is accomplished. This will allow you to be able to follow your strategies better and create the best possible trade for yourself.
An ideal checklist must contain the following:
– Time of the Day
– Technical Indicators that were used in the trade
– Any buy or sell signals which were noticed
– Risk/Reward value; and
– Daily Stop Limit
BE DISCIPLINED AND METHODICAL:
Work hard to develop a disciplined and methodical Forex trading strategy that works, and thereafter stick to it. A plan that is time-tested will always work better than one which is improvised, and will be instrumental in increasing your overall success rate. In order to create a healthy income stream from Forex trading, you need to be consistent in your approach. You must therefore think over each trade properly with the help of proper research and analysis.
MAINTAIN A DIARY:
As a forex trader (or even as a general person), you must make it a habit to learn from your past mistakes. It is imperative, therefore, that you maintain a diary and jot down all the in-depth details on the various aspects of every trade you’ve undertaken – right down to the when, where and they. You can then use all this jotted information to find out your winning strategy and thereafter pursue it regularly. Keeping a detailed diary, especially in the first few weeks of trading is a very valuable strategy.
REMEMBER THE FACT THAT FOREX TRADING IS MONEY MANAGEMENT: