Are there any trading tips how to succeed, or, maybe, there are some secrets that will make everyone a profitable trader? I’ve heard that only 10% of traders are consistently profitable, and the rest 90% regularly lose their money. So, what to do to join this 10% of luckies.
Not so long ago I took an interest in additional earnings on the Internet. After viewing a bunch of ads, reading inspiring stories, I decided to try trading on Forex. A few years passed, and I turned the additional earning to the main one.
Some people are naif to hope that they will become professional traders overnight and start making millions of dollars. But Forex requires a good training. All successful traders have gone through the studying stages.
Before starting my trading career I spent a lot of time on trading forums interacting with other traders, reading books and articles.
The first step towards becoming a profitable trader is a good training. You should realize that it will take a long time, even several years. There are a lot of available free educational resources that can help acquiring trading knowledge. I have already written about my top-list of forex resources.
If you are not a beginner and think that you have already mastered your skills, maybe it’s time to expand your knowledge?
Develop your trading plan and adhere to it
Have you already heard this statement “Plan your trade and trade your plan”? I fully agree with it. Developing of a trading plan is one of the most important trading tips.
The trading plan is a kind of my safety. When there is a strong situation in the market, I still can make balanced decisions. As you know, well-thought-out trades are likely to work better and be more profitable, than ones taken on a whim.
My trading plan covers risk management, entry/exit points, markets traded, and a time frame.
How to develop a trading plan? Answer the following questions:
- What is your time frame? Define the time frame you will trade – 30-minute, 1-hour, 4-hour. Beginners are recommended to trade on the higher timeframes (H1-D1).
- What financial instruments you will trade? For beginners, I recommend using the “majors”: EUR/USD, GBP/USD, USD/CAD and USD/JPY.
- What are the conditions of placing the order? Until you don’t form the rules of opening the deal, stay away from the trading. Write down all the conditions should be met before entering the market. You may buy support and sell resistance, trading breakouts or use technical indicators. Avoid using too many indicators, a large number of indicators on the chart may distract you from trading. For example, I use support and resistance levels, MACD, Price Action and wait for a few signals before opening the position. If your profits are more than your losses, your strategy is likely to be effective.
- Where to place Stop Loss? I never enter a trade without a stop loss. Using the example of a long position, the stop loss is placed below the buying price. Let’s consider: you opened the long position at the price of 1.2600 and placed the Stop Loss at 1.2570. If the price reaches 1.2570, the trade will be closed automatically, the loss will be stopped.
- Where to place Take Profit? You should know where to take your profit if the price moves in your favor. I recommend closing the position by parts. I try to adhere to the 1:2/1:3 risk/reward ratio.
Once you identify the main points of your trading plan, stick to it. When you have a clear view of traded instruments and conditions, it will be much easier to achieve profitable results.
Keep a trading journal
Do you keep a trading journal? Many market participants do not keep a journal, as they consider it useless. At the beginning of my trading career, I thought so. But when I lost my deposit and needed to remember what mistakes caused this, I couldn’t do it.
Since I regularly fix the details of my trading activity and track the mistakes. It helps me a lot as I have the record of my past trades and it allows looking back to the past performance and determining gaps in the trading strategy. This is how I get rid of unprofitable templates.
Plan your trading week
Professional traders recommend checking the economic calendar before every trading week to be aware of news scheduled.
I have already written earlier that it’s better to stay away from the market during the important news releases. So, before the beginning of the trading week, I look through the economic calendar and choose the events that will be important for me in trading. Information on the date and time of the news release is important for me, as it saves me from entering the market at the wrong time.
Why is it important to follow the news? The chart below shows a very good example of what happens in the market before and during the important news releases.
As you can see, on July 12, the market sharply exploded after the meeting of the Bank of Canada. The USD/CAD quotes fell by more than 200 points as the monetary policy was tightened.
Trading just before the news release is like a gamble as you don’t exactly know how the market will respond to the event.
Use support and resistance
Understanding of support and resistance levels is one of the most crucial skills of any trader. Support and resistance levels are special price levels, where the price either bounces or temporarily stops. Those levels are a reflection of supply and demand.
Prices move up or down depending on the demand and the supply. The demand is associated with purchases, while the supply – with sales. When the demand grows, the price increases. When the supply increases, the price falls.
Support is the price level at which demand strengthens and does not allow the price to fall lower. When the price starts to fall, buyers are activated. A significant number of buy orders are made, that prevents a further drop in the price. The support often acts as a trigger to buy.
Resistance is the price level at which the supply strengthens. When the price rises, buyers’ activity declines. The pressure of sellers exceeds the buyers and the significant number of sell orders prevent prices from rising higher. The resistance level often acts as a trigger to sell.
The resistance/support forms a kind of barrier for the further price growth/fall and the probability that the price brakes this “barrier” is much less than if the price rebounds from it.
Furthermore, when the price breaks it, this level becomes a new resistance and vice versa.
I listed the main trading tips that have to help you to succeed in Forex trading. Oh, I came near forgetting… You should set realistic trading goals. Don’t expect to turn $100 into $10 000 in a short period. Successful traders have realistic expectations concerning their profits towards the deposit on their accounts. They do not expect to get rich fast.
Hope these tips will be useful for you.