Successful forex trading is the result of strategy, discipline and the ability to manage risk. Forex traders venturing into the market without any type of strategy or plan are often find it difficult to profit or maintain any consistency.
The key to avoid this is to balance the three most important things regarding trading, they are;
- Learn a Strategy with an Edge
- Employ Proper Risk Management
- Build a Successful Trading Mindset
If a trader can develop these three above, then most likely they will lead to more consistent trading and profits. But let’s discuss some tips to help you become a successful forex trader.
Top Tips on Successful Forex Trading
The first step is to be clear about your goals. Goals have to be specific, measurable, and attainable.
But you must start by figuring out what trading system you will use to trade the forex market. Some people prefer to be more active, and thus prefer intraday forex trading.
In contrast, you might have a full-time job and not a lot of time to sit in front of the screen. If this is the case, then I suggest Daily and 4hr price action strategies, which allow you to do set and forget style trading. This requires a lot less screen time and is helpful for those who only have an hour or two to look at the markets.
Type of Strategy
The next thing to decide is the strategy you would like to employ for trading the markets every day. The two that I recommend are;
Price action trading gives you the tools to read the price action in the market in real-time, regardless of the time frame, instrument or environment. It is one of the most critical skills you can have to trade the forex market and communicates whether the larger players are heavily buying, or selling, and where.
Ichimoku cloud trading is a trading system developed several decades ago that is designed to capture large trends, major reversals, and future support and resistance levels, so quite a comprehensive system.
Once you have finalized which trading strategy you are going to use, and on what time frames, it is best to test your strategy on a demo account across various instruments.
Building a Successful Trading Psychology
The next important thing is trading psychology and the ability to control one’s emotions. A trader can have a successful trading system that makes money, but if he/she does not have the discipline to follow it, then they will lose money.
This requires patience, discipline, and focus. Luckily, these things can be built up over time as the mind has neuro-plasticity to it. But if you have a rule-based system, yet are exiting too early or not following the rules, then you may want to consider some focused meditation or ERT training to help build the neural pathways for successful trading.
Controlling risk and managing your money will be critical to your success. This aspect of trading is essentially pure mathematics. If you can put the numbers in your favour, then you will find yourself in the best position to profit mathematically.
The most important mathematical rule for trading forex is the Risk of Ruin, which looks at risk three-dimensionally. This measures risk by accuracy, % equity risked, and overall payoff ratio.