Large volumes of information, charts, odds – all this makes Forex trading a real art that does not obey scientific justification. Talent is necessary for trading in the Forex market, but you cannot go far on it alone. The best traders hone their skills in practice and adhere to strict discipline. They often analyze their own actions in order to understand what exactly drives their trade and exclude fear and greed from it. This article provides 9 simple steps that will help beginners improve their professionalism. Professional traders can also find useful information for themselves.
Step 1. Define your goals and develop your own trading style.
Before you go, you need to understand where and how you want to get. It is important to clearly understand your goals and how to achieve them. You must be sure that your trading system will help you realize all your plans. Each trading system has its own risk level and requires an individual approach from the trader. For example, if you are not able to sleep peacefully in the presence of an open position, you should engage in intraday trade. On the other hand, if you have sufficient funds to make a profit in the long term, positional trading is more suitable for you. It doesn’t matter which trading strategy you choose – the main thing is that it suits your character. Inconsistency of the trading system with the nature of the trader will lead to stress and loss.
Step 2. Choose a broker that provides the most suitable trading conditions.
But pay attention to the trading platform – it should correspond to your trading system.
It is very important to choose a broker that provides a trading platform suitable for your analysis. For example, if you prefer to use Fibonacci numbers as trading signals, make sure that the trading platform allows you to build Fibonacci lines.
You need to choose a broker with an excellent reputation, so do not spare time and compare brokers whose trading conditions are suitable for you.
Always remember that a good broker with a bad platform, as well as a bad broker with a good platform, can be a source of serious problems.
Step 3. Follow the selected trading system.
Prior to entering the market directly, it is necessary to determine what will affect your decision to enter the market or exit from it. Some traders prefer to analyze fundamental data.
by company or economy as a whole for making trading decisions; other traders use technical analysis – they need nothing but charts. Remember that fundamental data affects long-term trends, and chart analysis can help identify short-term trading opportunities. No matter which trading system you choose, it is important that you strictly follow it. Also, an important characteristic of the trading system is the ability to adapt it to constantly changing market conditions.
Step 4. Use the lengthy timeframes for determining the general trend, and over short timeframes for determining points of entry on the market and exit from it.
Many traders are confused because of the conflicting information obtained by looking at the charts on different timeframes. A buy signal on a weekly chart may overlap with a sell signal on an intraday chart. Thus, if you determine the main direction using the weekly chart and the entry point using the daily chart, make sure that the charts do not contradict each other. In other words, if a buy signal is generated on the weekly chart, it is necessary to wait for its confirmation on the daily chart.
Step 5. Calculate the average profit.
The average value of profit helps to evaluate the stability of the system. You need to remember all trading operations and calculate the difference between all profitable and loss-making transactions.
Take a look at the last 10 trading operations. If you do not have a real trading history, test your system on historical data and determine entry and exit points. Determine the total profit/loss for all trading operations and write down the results.
After that, sum the results of all winning trades and divide the amount received by the number of these trades:
|E = [1+ ( W / L)] x P – 1 where: W is the average winning trade L is the average losing trade P is the percentage of winning trades Example: If you conducted 10 trading operations and 6 of them turned out to be profitable, and 4 – unprofitable, the percentage of winning transactions is 60%. Let’s say the profit on winning trades was $ 2,400, then the average profit on a deal is 2,400 / 6 = $ 400. If the number of losses amounted to $ 1,200, then the average loss on the transaction is 1,200 / 4 = $ 300. Substitute the results in the formula: E = [1+ (400/300)] x 0.6 – 1 = 0.40 or 40%. An average profit of 40% means that for every dollar invested, you will receive 40 cents of profit.|
Step 6. Focus on trading and learn to accept small losses with pleasure.
After you have deposited money into your account, you must remember that they are at risk. That is why you should not need this money to pay for your daily expenses, bills, etc. Consider that the money in your trading account is the free money that you can spend. It will psychologically prepare you to accepting small losses, which is the basis of any risk management system. Focusing on trading operations and accepting small losses, instead of counting every cent on the account, will significantly increase your chances of success. Secondly, the maximum risk per trade must not exceed 2% of the total capital. This means that if the amount of your capital is $ 10,000, the loss on any transaction should not exceed $ 200 (2% of $ 10,000). If your stops are positioned in such a way that losses significantly exceed 2%, you need to reduce the duration of the transaction or reduce the percentage of borrowed funds.
Step 7. Form a chain of positive results.
If you conduct successful trading in accordance with your plan, a chain of positive results is formed. Success entails even greater success, which in turn strengthens the confidence of the trader, especially if the trade is profitable. Even if you incur small losses, but this happens in accordance with your plan, you gain confidence in yourself, which, ultimately, will lead you to success.
Step 8. Perform weekly analysis. Preparing in advance is a great habit. Study weekend charts, look for trading models on them and make a list of news that may affect the price of a trading instrument. You can stumble upon some graphic model, for example,
double top, and hear the opinion of experts about the upcoming market turn. You need to be careful about situations of this kind, because experts, by all means, try to draw you to the market in order to take advantage of the increased liquidity in their interests. At the weekend, you can objectively analyze the situation and develop the most effective trading strategy for the coming week. Learn to be patient, wait for the fulfillment of your forecasts, and the market will reward you for this.
If the market does not reach your predicted entry point, do not take any action. You may have to wait for a good trading opportunity much longer than you planned. If you missed a trading opportunity, calmly wait for the next one. Patience and discipline will help you to become a good trader.
Step 9. Take notes.
Entries are one of the most effective tools for a trader’s self-education. Print a chart and list all the necessary conditions for conducting a trading operation, including fundamental data that may affect your decisions. Indicate entry and exit points on the chart. Write down all the necessary comments.
Be sure to save all materials so that later you can always familiarize yourself with them. Write down all the emotional reasons that influence any action. Did you panic Are you overwhelmed by greed or anxiety? Record all your experiences on paper, as this will help you learn to make objective decisions, control feelings and follow your trading system, not habits.
The steps described will help you find your approach to trading and increase your professionalism. Trade is an art that requires special discipline and a decision-making sequence. Strictly follow your own rules for Forex trading, and success will not take long.