It’s no secret that trading forex is one of the most difficult vocations in the world. In many ways, it’s the true sense of a dog-eat-dog world, and if you want to make it as a successful trader, you need to be on top of your game every time you step up to your computer.
Looking at various statistics, it’s estimated that about 90% of retail traders lose money in the forex market. In fact, a lot of FX traders fail to make profits for more than four successive quarters. The reasons for this vary, but most of it tends to boil down to poor planning and preparation and an inability to manage emotions, especially during a brutal losing streak.
With that in mind, here are four quick tips to help you improve your forex trading accuracy and bring home more profit.
1) Keep your emotions in check.
It’s no secret that human beings are emotional creatures. Unfortunately, this makes us highly susceptible to letting our emotions get the better of us and cloud our judgment, especially when money is on the line. As any professional trader will tell you, bringing emotions into the mix when trading is a big no-no, as it can cause you to enter into sub-optimal positions that don’t strictly adhere to your trading strategy.
Emotions such as greed, euphoria, panic, and fear should not be factored into a trader’s calculations. However, it’s essential to acknowledge that these are perfectly normal emotions, and you must do what you can to minimize their effect on your decision-making. In general, the more you trade based on solid logic and well-thought-out rationale rather than your reactionary emotions, the better. Here are a few tips to help you keep your emotions in check:
- Don’t trade with money you cannot afford to lose
- Set a maximum loss amount per day and walk away when you hit that limit
- Never chase your losses
- Don’t trade if you feel anxious, panicked, or over-confident
- Decrease trading volume when on a losing streak
2) Clearly outline your trading style
The essence of strategy is choosing what not to do.Michael Porter
Before embarking on your trading journey, it’s critical to have a clear picture of where you’re going and how you’ll get there. Because of this, it’s important to outline your set of specific objectives, so you can develop a trading strategy that will help you achieve them. To do this, you need to know yourself, your needs, your appetite for risk, and your financial goals from trading. For example, someone who is 100% reliant on their trading income should have a vastly different trading style from someone who trades casually on the weekends for fun.
Additionally, in order to improve your accuracy, you should dedicate yourself to one type of trading style until you feel fully confident in it. Here are the four main types of trading styles:
- Scalping – trades of a few seconds to a few minutes
- Day trading – positions held for a maximum of one day (never overnight)
- Swing trading – positions held for a few days to a few weeks
- Position trading – long term positions
3) Always understand your entry and exit points
Similar to the previous point, each of your trades needs to be carefully planned out before entering into a position. One big mistake that many new traders make is entering into a trade without knowing where they will exit.
The problem with this approach is that it drastically increases the likelihood of trading based on emotions rather than well-thought-out logic with a clear methodology. This leads people to cut their winners short and let their losing trades run. In other words, the polar opposite of what a winning trader should be doing.
To avoid this, have a clear entry point for your trades and always take the time to set a stop loss and a take profit order in the market. This limits the decisions you have to make once your money is actively invested in the market.
4) Conduct both technical and fundamental analysis
For some reason, traders are usually divided into two main camps when it comes to the way they approach their analysis of any given currency pair. On the one hand, you have the fundamental analysts who look at factors such as the interest and inflation outlook for both currencies. They observe macroeconomic factors that may influence the overall strength and performance of any given currency in the market, which provides them with clues as to where the price may move in the future.
On the other hand, technical analysts forecast future price action of currency pairs based on historical price movements and patterns rather than the currency’s fundamentals. Using technical research, indicators, and oscillators to analyze the market can assist traders in determining not only when and where to enter into the market, but also when and where to exit it.
However, the best traders in the world will incorporate both of these types of research into their trading regimen. After all, the more knowledge and information you have access to, the more informed and accurate your trades will be.
If you’re struggling for time and can’t carry out your own research, then you could always turn to professional services that will give you signals for trading ideas. The best forex signals always come from trusted, reputable sources, so make sure you do proper due diligence, such as verifying the provider’s experience and determining their success rate over the past few months.
It takes a lot of skill to trade the FX markets. If you want to defy the odds and make a living as a trader, you’ll need a lot of patience, discipline, and consistency in the long run. That being said, the most significant obstacle to improving your results isn’t your trading knowledge. Instead, it lies within your ability to plan and prepare for upcoming situations while remaining emotionally stable.
Keep these four tips in mind the next time you start a new trading session, and you’ll have a much higher chance of profiting and conquering the markets. Best of luck!