Here at Trading Education we strongly believe that being a successful forex trader means being willing to constantly develop your knowledge of techniques and trading methods. Well, this is especially true if you are just starting out in the word of forex trading. This article will reveal the Top five golden forex tips for those starting out in this complex arena.
1.Know when and how to limit losses
Being a successful trader means knowing when to hold onto a trade and when to cut your losses and move on. In fact, your long-term profits aren't based so much on exiting a profitable trade at the right time, but more so exciting a losing one as soon as possible. To develop this ability, you need to make use of all loss-minimisation techniques and to make full use of the principles of forex technical analysis.
This includes trailing stops and stop-loss orders. So essentially, once the price reaches a certain point, the trade automatically closes and there is no increased risk to capital. Similarly, you should make good use of these trailing stops to automatically exit a profitable trade, so as to avoid any sudden, large downturns in the market price.
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2. Acknowledge your limits prior to opening a position
Don’t just open a position on a whim, because you feel like it's the right thing to do and that a profit is inevitable. Instead, go in with a clear head and a written amount that you are willing and able to lose. That way, you can determine a cash amount to trade with, that is healthy and sustainable in the long run.
Then, you have to actually stick to these limits! Be strict with yourself. A great way to do this is to set an overall weekly or monthly loss limit. If you hit that point in a current period then, regardless of what the market is doing, you need to cease trading. Take any time left over to clear your mind, evaluate your strategy and get ready to start trading again.
3. Develop a trading style and stick to techniques that fit this
No two experienced traders are the same. Instead, each one will build up a wealth of techniques and knowledge that they know fit their risk-reward attitudes and long-term strategy. They then stick to those methods. Yes, you can continue to build your knowledge, but do so slowly and alongside the strategies that you know inside and out and that work for you.
Blindly following cookie-cutter formulas won't be effective in the long run, if at all. If things were that easy, everyone would've done it and the market would probably collapse. The behaviour of the different players determines the forex market. Keep that in mind - the market is just a reflection of human psychology at a large scale.
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4. Be patient!
Patience is the key to success in a number of different financial environments, and this is especially true for trading. And what is the most crucial time for you to be patient? The answer: when you are looking to actually open a position. Never rush into it. Instead, you need to take your time to analyse all possible trades and weigh up the advantages and disadvantages.
Those who are impatient with opening trades tend to open far more trades, essentially as a part of a “hit and hope” strategy. Instead, each trade should be laser focused and based on sound, well-reasoned market judgement.
5. Stick to the plan
As well as expressing patience with all trades, you also need to be patient and diligent with sticking to your overarching trading strategy. Regardless of what this entails, do not alter your strategy on a whim. Just keep working hard, learning as you go and following the other four tips listed above. You will get there.
We agree strongly with all of these tips, especially when it comes to being patient. Far too many traders make large, unnecessary losses early on because they are impatient with a trade and want to see huge returns early on. Just remember, you can see financial success with forex trading. However, like all traders, it takes time. There are no shortcuts.
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