New traders often think trading is all about complex strategies, large amounts of money, or even inside information if you want to be successful trading in the Forex markets. However, this isn’t the case at all.
Efficiency, awareness, and thoroughness are the key ingredients to successful forex trading and these traits can be had without spending huge money on a finance degree at university or having a rich uncle that works at Aramco.
If you truly want to make more money in the Forex markets, here are a few tips that will increase your success and improve your overall trading profits regardless of whether you’re new to trading Forex or you’re a seasoned veteran that could use a refresher.
1. Don’t be a jack of all trades
Traders often get caught up spreading their resources around in many different markets instead of focusing on one or a few and getting to know the ups, downs, and intricacies that drive them.
Be a “master of one”. It is best to become an expert on that one or selected few markets where the investor either has a background already or has serious interest so they can focus their energy. Focus on a few markets.
For example, if you have experience in the oil industry or interest in that sector, focus on trading assets that are affected by it such as the Canadian dollar, Russian ruble, or even Brent itself where you can put your expertise and knowledge to work.
Maybe you’ve been working in an industry heavily influenced by gold and so you already understand the relationships between gold and several leading currencies and other stores of value like the Swiss franc.
Use your strengths to your own advantage and immerse yourself in markets that will reward you for your existing experience.
2. Develop a trading strategy first
Nobody plans to fail, but many investors fail to plan.
This could probably be said of many things in life, but never has it been more obvious than with poorly prepared traders using their “instincts” in an attempt to make money.
One of the most common mistakes for many traders is that they “shoot from the hip” in making trading decisions without any underlying reasoning for making these investment decisions. Trading isn’t gambling — it’s an investment decision based on a set of input that meets a predetermined criteria and that usually yields a specific result.
Develop a trading strategy using a demo account and then implement that strategy with a live account without deviation.
Good brokers will provide free demo accounts with virtual funds that allow traders to develop and practice trading strategies before they risk real funds.
3. Be a good money manager
Money management in trading isn’t financial planning like you might employ to pay your bills at home or put money into your children’s savings account.
Instead, it is a system developed to efficiently allocate your investment resources.
Use a money management system to control your losses. Losses will happen to every trader. Don’t let yourself go on “tilt” and blow your whole investment.
There are some excellent strategies out there like Parlay or Fixed Fractional, so do some investigation and choose an approach that fits your situation.
Make a money management plan and work the plan.
4. Information is king
Modern technology has given people from around the world access to multitudes of valuable public information.
All a person really needs is a working internet connection and they can explore nearly everything published on any given subject and get constant updates in their news feeds.
A great example of this regards US oil reserves (stockpiles).
These are announced weekly to determine the rate at which the US is using oil, which, in turn, affects a whole host of different Forex assets.
Use the news, especially the free Economic Calendars that are available online to know when to trade. The “when” is often more important than the “how much” in trading — Timing is everything.
Know what events are upcoming and what effect they will have on markets.
Recipe for success
There is a common denominator here. Not every investor will find success, but if you speak with a successful trader, you will find that they all use these four tips.
Following these tips will help ensure you get into the black and stay there.
In the end, you can reach your financial goals not by “luck” but by being diligent, thoughtful, and prepared.