Good Morning,
As any experienced trader will tell you, to become successful you need to have extreme patience and be able to adapt quickly to ever-changing market conditions. Having a trading plan will solve half of this, but the other vital key is the management of trading positions.
One of the biggest tips for trading I can give is to stay on top of your trade management and forex strategies. The biggest drawback I see in clients is their lack of experience when it comes to money management, this then leads to trade frustrations and chasing the market. Whether you are just about to learn how to trade or are already an experienced trader, money management cannot be ignored.
Today we are going to discuss the top forex trading tips that you can implement to become successful in the market.
10 BEST FOREX TRADING TIPS
Calculating Your Risk Before Entering the Trade
This is of vital importance to ensure you aren’t going to blow your account. Ensure your overall risk on each trade is no higher than 1 – 2% of your total trading capital. This way even if you find yourself down on a trade, the risk is limited and managed correctly.
Never Chase the Markets
This is what we call being too aggressive with your trades, its often the largest mistake traders make when starting out in trading forex. If you take too many trades or are trading with too much risk this will hinder your trading performance. Adjust your position size if you are planning on taking more trades to ensure risk is the same.
ATTEND OUR MARCH 2019 TRADING TIPS CONSULTATION
Have Realistic Expectations
Another big failure in traders is expecting themselves to make huge profits straight away, this, of course, is not realistic and will lead you to be too aggressive in your trading. Set out realistic goals to achieve month by month, this way you won't think about daily gains or losses too much.
Don’t Hold Trades Too Long in a Loss
Always cut your losses to minimise risk, it’s essential to exit quickly if you feel a trade is running away from you or your reasoning wasn’t correct before you made the trade. You can not control the market, if the trade is bad, cut the loss.
Expect the Worst
Remember something very vital, your past performance doesn’t represent future results. What you did yesterday or last month doesn’t mean you will do it again tomorrow or next month. Be prepared for making losses here and there. Also, be prepared for shock moves in the market where currency pairs can drop or rise very quickly on fundamentals. Having your risk mapped out before you place the trade will help prepare you.
Have Your Targets Planned Before You Enter
Always ensure you have a target in mind before entering into the setup, otherwise, you will be lost while in the trade with no direction of when to exit. Having targets solidifies discipline in trading.
Always Use Stop Losses
Ensure you are always using stop losses in every position you take, this is both sensible and logical to do for any trader. It will shield you from making huge losses or being surprised by a shock move in the market. Stop losses can vary on trades depending on the strategy, but for Platinum Trading Academy, we use stops anywhere from 20 pips to 40 pips on a trade.
Stop losses are vital to surviving in forex trading, remember longevity in trading is more important than anything else. You can’t expect to make long term profits if you can't survive, stop losses also mean you don’t need to monitor the market all the time. They will give you the confidence to step away from the screen knowing if anything goes wrong you have something to cut your loss.
Never Trade With Emotions
This is easier said than done of course. But trading after you have just suffered a bad loss is not a good idea. You will be trying to chase that money back by risking too much or overtrading. This will lead to further losses and greater anger in the trade. A good tip for this is to take a break from the screen for a while and return with a fresh point of view.
Stay on top of your position sizes and don’t alter them just because you made a loss the trade beforehand.
Understand Leverage
Leverage is something many clients fail to understand when it comes to forex trading. Leverage essentially enables you to trade your capital at bigger position sizes to produce greater profits. I.E if you had a $1,000 trading account with a 1:200 leverage you can place a trade up to $200,000. Remember the notional value of 1 lot is $100,000. So you would effectively be able to trade a position size of $20 per pip.
But higher leverage doesn’t mean you will gain more profits, it also means you can lose more too. Be cautions and ensure you are trading within your limits to best survive in the market.
Longevity is Key
Always set out a longer term 3-5 year plan of where you want to be, thinking the too short term will ruin you and end up blowing your account out. Thinking long term will get all the negative thoughts out of your mind and enable you to focus day to day. Do not stray from your trading plan, stay true to it throughout the process.
Conclusion
Calculating Your Risk Before Entering the Trade
This is of vital importance to ensure you aren’t going to blow your account. Ensure your overall risk on each trade is no higher than 1 – 2% of your total trading capital. This way even if you find yourself down on a trade, the risk is limited and managed correctly.
Never Chase the Markets
This is what we call being too aggressive with your trades, its often the largest mistake traders make when starting out in trading forex. If you take too many trades or are trading with too much risk this will hinder your trading performance. Adjust your position size if you are planning on taking more trades to ensure risk is the same.
ATTEND OUR MARCH 2019 TRADING TIPS CONSULTATION
Have Realistic Expectations
Another big failure in traders is expecting themselves to make huge profits straight away, this, of course, is not realistic and will lead you to be too aggressive in your trading. Set out realistic goals to achieve month by month, this way you won't think about daily gains or losses too much.
Don’t Hold Trades Too Long in a Loss
Always cut your losses to minimise risk, it’s essential to exit quickly if you feel a trade is running away from you or your reasoning wasn’t correct before you made the trade. You can not control the market, if the trade is bad, cut the loss.
Expect the Worst
Remember something very vital, your past performance doesn’t represent future results. What you did yesterday or last month doesn’t mean you will do it again tomorrow or next month. Be prepared for making losses here and there. Also, be prepared for shock moves in the market where currency pairs can drop or rise very quickly on fundamentals. Having your risk mapped out before you place the trade will help prepare you.
Have Your Targets Planned Before You Enter
Always ensure you have a target in mind before entering into the setup, otherwise, you will be lost while in the trade with no direction of when to exit. Having targets solidifies discipline in trading.
Always Use Stop Losses
Ensure you are always using stop losses in every position you take, this is both sensible and logical to do for any trader. It will shield you from making huge losses or being surprised by a shock move in the market. Stop losses can vary on trades depending on the strategy, but for Platinum Trading Academy, we use stops anywhere from 20 pips to 40 pips on a trade.
Stop losses are vital to surviving in forex trading, remember longevity in trading is more important than anything else. You can’t expect to make long term profits if you can't survive, stop losses also mean you don’t need to monitor the market all the time. They will give you the confidence to step away from the screen knowing if anything goes wrong you have something to cut your loss.
Never Trade With Emotions
This is easier said than done of course. But trading after you have just suffered a bad loss is not a good idea. You will be trying to chase that money back by risking too much or overtrading. This will lead to further losses and greater anger in the trade. A good tip for this is to take a break from the screen for a while and return with a fresh point of view.
Stay on top of your position sizes and don’t alter them just because you made a loss the trade beforehand.
Understand Leverage
Leverage is something many clients fail to understand when it comes to forex trading. Leverage essentially enables you to trade your capital at bigger position sizes to produce greater profits. I.E if you had a $1,000 trading account with a 1:200 leverage you can place a trade up to $200,000. Remember the notional value of 1 lot is $100,000. So you would effectively be able to trade a position size of $20 per pip.
But higher leverage doesn’t mean you will gain more profits, it also means you can lose more too. Be cautions and ensure you are trading within your limits to best survive in the market.
Longevity is Key
Always set out a longer term 3-5 year plan of where you want to be, thinking the too short term will ruin you and end up blowing your account out. Thinking long term will get all the negative thoughts out of your mind and enable you to focus day to day. Do not stray from your trading plan, stay true to it throughout the process.
Follow the forex trading tips provided above to exercise effective money management, if you follow these you will be on your way to becoming successful. We would recommend practising all these tips on a trading demo account first and foremost.
ATTEND OUR MARCH 2019 TRADING TIPS CONSULTATION
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Nisha Patel
Live from the Platinum Trading Floor.