For the inexperienced trader, forex is a good way to lose money. To be successful in the foreign markets takes a great deal of skill, many hours spent researching and learning about the field, and a well-honed and cleverly executed trading strategy. It is, ultimately, a tactical game, and if you want to come out on top, you need a plan that will maximize your chances of success. Here are just a few tips to help you formulate one…
Make Plans and Stick to Them
When you begin trading, it’s important to take the time to sit down and think about what you’re hoping to achieve. Although forex is a risky game and things might not always go as planned, it’s important to be specific, so write down exactly what you want to accomplish, and a timeframe to go with it. Make sure that you define what constitutes success and failure for you, in terms of achieving your end goal. When you’re planning your timeframe, don’t forget to add in a period for finding your feet in the markets, as well as factoring in how many hours a day you’ll actually be able to devote to trading. Once you have a clear vision of exactly what you want, you can start taking steps to achieve it.
Choose an Appropriate Trading Package
The broker you choose is likely to have several different account packages available to you. These various options will offer a variety of tools and leverage ratios, and you must spend some time working out which one will best complement your style of trading. These accounts are likely to cater to different levels of experience, so consider how much handholding you’re really going to need before committing to a broker and package. Many, like Oanda, will offer demo accounts for you to test their facilities, so take advantage of these wherever they’re available.
Stick with What You Understand
One of the most common reasons for investors to lose money is their overestimation of their own abilities. If you don’t understand what you’re doing, then don’t throw money at it. Every time you consider a trade, ask yourself these simple questions: is there a solid reason for effecting it; would you be able to defend your decision if asked against critics? If the answer to either of these questions is no, then don’t do it. Be sure, too, that you never commit to trade without fully understanding both the potential positives and the losses that may result, weighing these up, and even after doing so, feeling confident that you ought to go ahead.
Study Both Your Successes and Your Failures
No matter how experienced a trader you become, remember that there will always be room for improvement. Being analytical will be vital to making successful trading decisions, and this doesn’t just apply to your analysis of charts and price trends, but also the strategy underlying them. When things go wrong, don’t despair, but instead work out why your methods failed. When they go right, do the same. This self-evaluation is the best way to teach yourself what does and does not work and should be instrumental in refining your trading tactics.
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