Forex is all about timing, discipline, and of course a little bit of luck. Even the best trading strategy won’t work 100 percent of the time. But, that doesn’t mean that discipline isn’t warranted. In fact, without discipline, you’ll always lose, and with it, you will always win in the long-term, even when you lose on individual trades.
All successful currency trading strategies start with a few simple rules. These rules can be about entry and exit points, a master plan for trading, and even trading rules on tradable capital. But, what’s important is that you set firm rules.
Most people don’t actually do this, and this is why they never profit long-term. Keep a written journal of your trading rules, and periodically revisit them to see if they make sense. As your skill and experience evolve, you may find some rules are outdated or unnecessary. Other rules need tweaking. Sometimes you realise the need for more rules.
For example, many beginning traders don’t understand the principle of limiting trading capital. They just go all in with all available resources. But, professional traders rarely trade with more than 1 or 2 percent of their total account on any single trade. This protects them from unexpected margin calls and also gives them financial room to breathe should they need more money to hold out for a late rally.
Another rule often overlooked is the opening strategy. Most traders focus so much on the technical side of things, and the actual trading, that they forget to think about, and set rules for, how they will first determine their entry points. What trading strategy will you use? Why? Will you rotate strategies and when will you exit your position for the day? What are your profit targets for the day?
All of these are things you want to know upfront before you start putting money in the pot.
Don’t Use a Fully Automated System
A lot of new traders are afraid to make their own decisions, so they either hire someone to make trades for them or they use bot traders – computer programs – to manage all of their trades. This is a huge mistake. First of all, you’re going to fall down initially. This is just part of the learning experience.
Secondly, a bot trader gives you a false sense of security. Let’s say there’s a heat wave that’s expected to destroy a large portion of crops this year. The bot trader can’t account for this, but you can. And, this is an important economic indicator for at least manufacturing and agricultural industries.
Never remove your mind completely from the trading platform.
Don’t Try Fully Manual Trading
At the same time, don’t count on your mind to be able to make all of the technical moves necessary. Once you’ve nailed the fundamentals, let a computer handle the technicalities for you – they’re really good at that sort of thing.
Treat It Like A Job
Many traders view forex as a hobby. Even if it’s not your day job, you have to treat it as some type of work. Otherwise, you won’t take it seriously. And if you’re not taking it seriously, you stand to lose a lot of money.
Joel Marsden has his own set routine to Forex trading and he has done well with it over the years. A passionate writer, he enjoys sharing what works for him with newcomers to the investing world.