In my opinion, most people make trading more complicated than necessary. It is not easy to make money (in the long term) with forex trading. But it’s easier if we sit back and pick out the most important points to focus on. That’s what I call key factors to success in forex trading.
In this article, I will only list out 4 factors. And I want you to really focus on these ones. If you are spending time and energy focusing on other things in trading beyond these 4 factors, you are making your trading more complicated. You do not necessarily have to waste your time like that.
For those who are new to Forex or who are struggling and losing money in this market, this article will be of great help. This is what I always hope for.
Register an Exness account NowGet $1,000 Free for beginners
The entry strategy factor in Forex
The first thing when talking about this is that you only need one strategy for yourself, the simpler the better.
Many traders do not know what their strategies are. They go around searching and trying one strategy after another. Or even worse, they also mix these strategies together, getting the wrong sow by the ear. This definitely makes you confused. And most likely it is the first reason you lose money in the forex market.
So, the first thing you need to focus on is having an appropriate trading strategy/tactic/method. I recommend pursuing price action. It’s simple and very effective. And no matter which strategy you use, master it. Be very aware of it, until you don’t need to ask questions when deciding whether to enter or exit a trade.
There is an old saying of the West: “Success comes when careful preparation meets opportunities.” If you do not have good tactical preparation, when good opportunities appear in the market, you will not be able to seize them.
The hard part here is that you only throw money into the market if and only if your system confirms it in the market. And we now move on to the next extremely important factor.
Manage your MONEY
This includes risk management, how much money you manage, and what to do with profit if any. The first step is to pre-set the risk amount for a trading order.
You need to be very comfortable with this risk amount. If losing it does not change your emotions much, it is a reasonable amount. You also need to ensure this risk amount is optimized enough for a few losing orders before your balance runs out. Because your strategy needs a series of orders to see if it works.
I have an example if you need advice, as follows: The risk amount for each order should be guaranteed so that your account balance can withstand at least 40 consecutive losing orders. If you have $3000 in your account, you can put a risk level for each order of $50. In case you lose consecutively 20 orders, you still have $2000 in your account.
In case if you lose (almost) 20 consecutive orders while still following the same method/strategy, then most likely it is not effective. Or maybe it’s because you’re not as disciplined as you think.
The important thing here is that you are not emotionally interrupted when setting a reasonable risk. You can completely turn off the computer, sleep a good night after placing an order. If you lose, it will only take a small reasonable amount compared to your balance.
The key to helping you manage risk to avoid the effect of emotions includes:
- Don’t start with an amount that exceeds your comfortable tolerance if you lose. This amount will have to be at the level where you can comfortably do other things in the next 12-24 hours before you need to check your orders again. You need to be completely at ease when your order hits the stop-loss.
- Don’t start with money you can’t afford to lose. If you don’t have much money or if you are still struggling to make a living, do not trade on a live (real) account. Please seriously practice with a demo account right down here.
Register a Demo Exness account NowGet $1,000 Free for beginners
Discipline factor
I often think of the metaphorical image of discipline as a glue that gathers the aspects of your method. You need to learn how to control the discipline to always stick to trading strategies, money (risk) management methods, exit strategies (closing orders), etc.
In trading, patience and discipline are almost identical things, or also can be seen as one. You need to be (extremely) patient to wait for the best opportunity to appear. And you need to be disciplined to stay patient. You cannot achieve patience without discipline. You need both, so focus on discipline.
Don’t make this complicated. You just need to really understand your trading method and have a good discipline to wait until the market offers you a good opportunity to practice your method. Do you understand what I mean here?
Discipline is also that you (minimize) do not interfere with opened orders in the market. Interfering with opened orders proves that you are negating your own strategy and method. You do not trust them.
The irony here is that it’s hard for most people to enter an order and then turn off computers to do other work. In contrast, people often sit back and nervously observe the fluctuations in their accounts. And most likely, they will stop loss or take profit much earlier than planned. And that is the way to lose money, even in the short or long term.
Maintaining discipline is difficult. We have no boss or foreman to whip our butts. There are only us who fight ourselves. Usually, it is too easy for us to pamper ourselves.
However, if you want to become a successful trader, who is among the meager percentage of making money from the forex market, you need to do things that most people can not do. Always remind and train yourself to keep discipline.
The exit strategy factor in Forex
At the beginning of the article, I told you that you need an entry strategy, and you also need an exit strategy. Often people have an entry strategy but no exit one or pay very little attention to this.
However, determining the exit point in advance may be more important than determining the entry point. Without determining a good exit point, traders often take profit too early and regret losing a big profit.
How well you determine your entry point depends on the state of the market you are in. For a trendy market, you should be brave to risk. Your risk/reward ratio should be 1:3 or 1:4 rather than 1:1 or 1:2. With the market struggling within a narrow range, you should be happy with the 1:1, 1:1.5, or 1:2 ratio.
What you need to note here is: always determine an exit point before you place an order (and of course, never start without a stop-loss).
The 04 bullets above are what I want you to really put your energy and time into.
Always practice and improve every day.
The path to becoming a trader is still very, very long ahead.
Register an Exness account NowGet $1,000 Free for beginners
The post 4 Key Factors To Success In Forex Trading appeared first on How To Trade Blog.
source https://howtotradeblog.com/key-factors-to-success-in-forex-trading/
No comments:
Post a Comment