Irrespective of whether you’re a novice forex trader or a seasoned investor, there are always ways in which you can improve your trading skills and increase your chances of making a profit. This rings particularly true for the amateur trader, for whom the basic methodology of forex investment can be elusive. It’s incredibly important that you get a grasp on this. As simple as it sounds, the most important factor in your success will be a well-planned and executed strategy. To develop this, it’s important to follow the markets, diarising, tracking and analysing each of your trades alongside their outcome.
Here’s how to do it…
Planning Your Trades
In forex, the well-known adage that ‘if you fail to plan, you plan to fail’ rings true: successful traders start with a well thought out and painstakingly honed strategy, and they stick to it.
One of the key parts of your strategy will be identifying currency pairs that work well for you. To choose the right ones for you, spend some time thinking about your risk parameters, and then choose a currency pair that fits this strategy.
Once you’ve selected your currency pairs, think about a timeframe that fits with them, whether this means holding your position for minutes, hours or days.
Setting Your Targets
Before you ever enter into a position, be sure to formulate an exit strategy. If the position proves successful, at what rate will you choose to cash in on your profits? Conversely, if it proves disastrous, at what threshold will you cut your losses? Set your stops and limits in line with this.
Following the Forex Market
There are a number of tools available to help you follow the forex market, from charts, to calendars, to calculators like the one offered by FxPro. It’s important that you take advantage of the information these provide to inform your movements.
Charts are one of the most important tools that traders have at their disposable, and can offer invaluable information, presented in a manner that allows split-second analysis to enable you to make quick decisions. Be sure to take advantage of any that are available to you as part of your package, and take stock of those that are on offer when choosing a broker.
As a trader, you should also be utilising all available news channel, especially specialist economic and forex publications, to inform your trades. The real world has a major impact on the forex market, and it’s important that you’re aware of issues that may affect prices, so that you can incorporate suitable responses into your strategy.
Keeping a Forex Diary
A brilliant way to educate yourself is to make sure that you learn from your past mistakes by keeping a forex diary. Document all of your movements, so that you can identify what works and what doesn’t. Many traders fail because they make the same bad moves over and over, a mistake that can be very easily avoided.
If you do decide to keep a diary, try to include the following in it:
- The date and time you took the position
- The rate at which you took the position
- Your reason for taking it
- The strategy behind it
- The date and time you exited
- The rate at which you exited
- Your profit or loss
- Why you exited.
Learning to identify successful and problematic patterns can help you to improve your strategy in the future.
With a little luck and the help of our handy tips you, too, could increase your chance of being successful on the forex market.