How can one succeed in forex trading? In this article, we will go through some steps that we believe can help you in your journey to successful trading.
Let’s dive into the 5 steps of successful Forex trading:
Step #1: Pivot Points – This is important in all realms and types of trading. Whether you focus on day trading, position trading, and so on and so forth. Why is pivot point so important? For the simple reason that all the thousands of traders worldwide are observing pivot levels just like you will be.
Regardless of which trading strategy you use pivot trading can serve to help you in forex trading. We’re not saying this is the sole basis of your trading strategy rather it including it doesn’t hurt. Keeping an eye on daily pivot points gives you a feel of continuous trends that take place on the market. It also opens your eyes to potential market reversals.
Step #2: Trade with an Edge – Successful traders usually come about when they risk their money as a result of an opportunity in the market that presents them on edge. In most cases, it increases the chances of the trade being more successful than they initiated. An edge for you can be a number of things. Buying at a price level that in the past has shown support for the market is an example.
Another example of many indicators working in your favor is when the price hits a defined support or resistance level. The price action at that level indicates a possible market reversal via a candlestick pattern such as a pin bar or doji.
Step #3: Preserve your Capital – In forex trading losing a big sum of money is something that should be avoided. It is more important than making large profits. This may not sound right to some, being that most look at trading for the income it brings. But rather it is important to preserve your capital when winning forex.
Paul Tudor Jones the creator of the Tudor Corporation said the following statement. “The most important rule of trading is to play great defense.” The term he used “playing great defense” refers to preserving your trading capital. Now, why is this so important? The fact of the matter is that most beginners who start trading run out of money and therefore stop trading. They don’t get the chance to make a profitable income as a result of this. By avoiding suffering losses and continuing to trade efficiently you can gain exponential profits into your account.
The most essential trading strategy is to limit your losses by avoiding overtrading or taking on too much risk in a single deal, preserving your investment funds.
Step #4: Simplify Technical Analysis – A trader can apply an almost infinite number of different lines of technical analysis to a chart. But more isn’t always better. A simple trading strategy tends to work more effectively and produces more successful trades. One with simple rules that doesn’t follow many rules and regulations is often the best.
Step #5: Stop – Loss Order to be at Reasonable Prices – This may seem like something to consider only when losing a trade however it can be a big element to winning forex trading.
Traders need to keep in mind that good money management means that stop-loss levels are not to be placed too far away from the point of entry. This can affect the trade in the wrong way.
It’s important to participate in trades that allow you to place a stop-loss order close to the entry point which can help you avoid big losses. It is also important that these stop-loss orders are at affordable price levels. Stop-loss orders should be placed a little beyond a price that the market should not trade at if your market analysis is right.
The forex market just like any other investment has specific characteristics and with experience, it can be mastered. Traders should keep in mind the tips we discussed above and this can serve as a guide for their success. Of course, it is not a medicine for success but it’s a solid start.