No matter how long you have been trading for, there is always room for improving your skills. If you want to win more often with Forex trading, then education is key. Many traders often don’t even realize that they are making common mistakes that will negatively impact them in the long run.
You should always be working to learn more about the market and stay up to date with the latest news and trends. Don’t be afraid to learn a few new tricks that can help to transform your trade and find new opportunities. Here are five tips to get you started:
Choose Your Trading Method and Refine It
One mistake you often see traders make is getting too comfortable with a trading strategy. They will do everything they can to learn about Forex trading at the start, and then once they have figured out a trading method, they will just stick to that. There is no one method that will bring you excellent results every time; otherwise, we would all be doing it!
If you want to get better results, then you need to work on your method, so it brings you gradual success. Price action trading is a popular trading method since you don’t have to worry about it not working every time the markets experience a shift. It’s all about learning to identify repetitive high-probability price patterns.
No matter what style you opt for, you should always work to perfect your method. Commit to it and keep on practicing until you have got it just right. Try and avoid the temptation to keep changing strategies; this is more likely to lead to confusion and frustration rather than big wins.
Keep a Forex Diary
You should always make sure that you treat your trading seriously. Remember, you are running a business here, so don’t think of it as a hobby or get rich quick scheme. Every trade needs to be carefully considered, and you should have a clear overview of your trades, much like you would over business transactions.
Keeping a diary is a great way to keep track of any mistakes you are making, so you can avoid making them over and over again. You will start to identify what is working for you, what isn’t, and even recognize successful trading patterns. That means you can keep an eye out for when they return and ensure you maximize profit.
There are a few things you should include in your trading diary about your position, such as:
- The date and time you took it
- The rate
- Your reason for taking the position
- Your selected strategy
- The date and time you exited
- The rate when you exited
- Any profit or loss made
- Why you chose to exit the position – was it linked to a strategy?
Having this information to refer to is one of the best ways to work on your trading, identify areas of improvement, and find a way to trade that works best for you.
Learn To Trade on Higher Time Frames
Newbie traders often think that trading with lower-time-frame charts is the best option as it gives you more opportunities to trade, and thus earn a profit. While you may get more signals trading this way, you will also observe more false signals, which can make it difficult to consistently make money.
Beginner traders should instead focus on using higher-time-frame charts. This trick alone can make a big difference and help you to perfect your strategy. Essentially, a candle made up of 24 hours worth of information will be much more valuable to you than one made up of only an hour. The more time that goes into making the chart signals, the more powerful and reliable they will be.
One of the biggest and most common mistakes made by Forex traders is over-trading. It’s easy to do; you have access to the market 24 hours a day, which can make it very difficult to avoid the temptation to trade. The worst part is that most traders don’t even realize they’re doing it and just how much of an effect it can have on their business.
The first thing you need to do is learn to identify over-trading and how to resist temptation. You may have noticed a feeling like you always need to be in the market, and get the urge to immediately look for another trade after winning or losing another. Other signs can include entering trades that don’t fit in with your strategy, simply forgetting your method by getting too wrapped up in trading, or trading without having first mastered an effective trading method.
If any of this sounds familiar to you, then you are most likely over-trading. What you need to understand is that it is okay not to be in the market. In fact, choosing not to be in it can actually be a very valuable trading position. Being “flat the market” can be the right decision, for instance, if you forego a trade that does not meet your strategy, and you would have made a loss on it.
Being consistent with your trading is much more important than always being in the market. Even if you get lucky and make money from some trades, in the long run, this strategy will not work. In fact, getting lucky on a trade that doesn’t fit your method can be one of the worst things to happen to a beginner trader, as you end up reinforcing bad trading behavior. In the long run, this just leads to losing money.
Only Trade With Money You Can Afford To Lose
You must remember that trading on the Forex market will always carry a degree of risk, no matter how hard you try to perfect your trading method. The high degree of leverage is great when it works for you, but it can work against you as well.
There is always a chance that you could lose some, or even all of your initial investment. That is why you must always take care and only trade with money that you can afford to lose.