In order to trade Forex profitably, there are certain rules that must be followed. There are charts and ratios that needs to be understood when dealing with the currency exchange. There is no doubt that Forex trading is an art and a science, those who engage in it profitably have taken their time to master the rules of trading Forex. The following are nine tips that will enable you make profit as a Forex trader:
- Set your goals and choose a compatible trading style:
In order to trade Forex profitably, it is essential that you set your goals and choose a trading style that is most compatible with your preset goals. If your goal is to make Forex trading a full time source of income then you may consider day trading. On the other hand, if your goal is to make Forex trading an alternative source of income then you would be better as a Position Trader. Your goals should determine the trading style you will adopt.
- Choose a broker with the most suitable platform for your trading style:
There are different Forex brokers offering different trading platforms. It is very important that you choose a reputable Forex broker like CMC Markets. Moreover, it is important for you to choose a Forex broker that offers a trading platform that is suitable for your trading style. If the trading platform you choose is compatible with your trading style then you are more likely to trade Forex profitably.
- Begin with small sums and increase your capital with profits not deposits:
One of the best tips for trading Forex profitably is to begin with small deposits and use the profits to grow your capital. Do not be tempted to increase your capital by making more deposits.
- Carefully choose your trade entry and exit time frame:
It is very important that a Forex trader is careful when choosing entry and exit time for making trades. This is because there is bound to be conflicting information when looking at charts from different time frames. What shows up as an opportunity to buy on a weekly chart could be a strong sell signal on an intraday chart. If you are using both the intraday and weekly charts, be careful to synchronize the two. This will enable you to determine the appropriate entry and exit time frame for your trades. Do not set your entry and exit time frame without synchronizing both charts. e.g.Euro and Dollar exchange
- Keep a trading journal:
It is essential for a smart trader to keep a trading journal. If you place a winning trade, you should record why and how you made the trade. The same thing should apply to losing trades. A trading journal enables you to keep the trading pattern that wins and avoid the trading pattern that loses. The trading journal should include the entry and exit conditions of each trade as well as the resistant and support levels.
- Patience is a virtue for a Forex trader:
A Forex Trader must learn to exercise patience. Patience enables a trader to wait for the right opportunities to appear. A trader must enter and exit a trade at the right moment in order to make profit. Entering a trade and exiting at the appropriate time requires patience.
- Implement a risk limit:
It is important for a Forex trader to develop and implement a risk limitation system.There should be a maximum percentage of your Forex portfolio that you are willing to risk on any trade. This implies that a Forex trader must not place the total amount of money in his or her portfolio on a single trade. There should be a maximum percentage that should go into every trade.
- Follow Experienced Traders:
Social Trading is a form of Forex trading that allows traders to follow experienced traders and copy their trading strategy. This is a very easy way to succeed in trading Forex.
- Develop a strong work ethic:
Hardwork is a fundamental requirement for anyone who wants to succeed in anything in life, same goes for Forex trading. A Forex trader must develop a strong work ethic which involves consistent research and study of market trends, consistently learning about new strategies and working to improve previous ones.