15 Proven Tips To Succeed In Forex Trading

Many people think that trading is only about buying low and selling high. The traditional way of trading was indeed all about making profits from the price rise but the financial markets have come a long way over the years, especially the currency market. The foreign exchange market has turned into a truly global and transparent trading place as the daily turnover has already surpassed $7.5 trillion. So, if you gain market knowledge and follow a sound trading plan, you can tap into profitable opportunities.

In this blog, I will be sharing 15 proven tips that can help you to succeed in forex trading.  

1. Master Money Management

Your success as a trader is not solely dependent on your trading skills. Being good at money management is just as important. Especially because forex trading is highly leveraged and how well you manage your funds and margin is a key criterion for success. Whenever you use leverage, you need to use a margin calculator to compute the average margin requirement based on your trade size.

You need to ensure that your account balance is sufficient to place 15 consecutive trades as you may encounter 5 or more losses in a row. Besides this, you need to limit the risk per trade to 2% or 3% of your total account balance. This way, you can not only minimise the potential losses but also make the trading process less stressful.

2. Selecting A Suitable Strategy

You need to be very careful while selecting your forex strategy as it needs to be perfectly aligned with your personal trading goals, preferences and risk tolerance. You should also consider your own strengths and weak points as a trader for picking a trading approach that is compatible with your trading personality and skill level.

3. Picking The Perfect Time Frame

When you are devising your strategy, you have to decide all the key aspects including the perfect time frame for analysis and trade execution. Beginners are advised to start with longer time frames as they are less complex to comprehend. You can even use multiple time frames to confirm your analysis.

4. Focus On One Currency Pair First

When you are learning to trade for the very first time, it is better to just focus on one currency pair to avoid any confusion. Beginners are always advised to start with a major pair like EUR/USD to trade with ease. You need to consider your own time zone and active trading sessions for selecting a suitable currency pair.

5. Find A Reliable Broker

Your forex broker plays an important role in the trading process as they not only connect you to the decentralised market but also provide real-time price quotes defining the trading conditions that you get. Trading with a regulated and low-cost broker is the best way to ensure safety and high-profit potential by reducing the trading cost.

6. Optimal Position Sizing

You need to decide the optimal position size for a trade depending on how much money you want to risk for it. The standard lot size is the most common one but you can also trade with mini and micro lots for opening smaller-sized trades. You can even use a position size calculator to determine the ideal trade size based on your risk tolerance.

7. Always Trade With Stop Loss (SL)

No matter how good a trade setup looks, the risk of the market turning against you is always there. Hence, you should always place a stop loss while entering a trade. This way, you can keep the potential losses within a limit as the trade will be automatically closed when the specified price is reached, confirming a loss.  

8. Be Careful While Entering & Exiting a Trade

You need to be very careful while entering and exiting a trade as the market can fluctuate in seconds. So, you need to confirm your analysis before taking any action. Once exited, you can use a profit calculator to check earnings in the base currency of your account to get an idea of the actual profits that you’ve made. You can add it to your journal along with the reasons for getting into that trade for learning purposes.

9. Indulge In Continuous Learning

It is important to continue learning even after mastering all the basics of currency trading. Being a forex trader is all about seeking new information and adapting to the changes in the fast-moving market. You may find success early or sometimes it comes much later, but you should be determined to keep learning to sharpen your skills and retain the success that you have secured.

10. Identify The Market Trends

The best time to find trading opportunities is when the market is trending. In forex trading, you get a chance to make profits during both uptrends and downtrends. Even sideways movements are enough to capture a few pips without much risk. Hence, you need to identify the trends in time and use them to your advantage after considering the market sentiments which can either be bullish or bearish.

11. Evaluate Your Performance

Doing some kind of self-assessment from time to time is crucial for recognising your own mistakes and flaws. While reviewing your trading journal, you need to make sure that you are sticking to your original trading plan. Because no one enters the market as a pro trader. Thus, analysing your own trades gives you a clearer idea about how far you have come and what more you can do to get the expected results.

12. Manage Your Emotions

Many traders struggle to manage their own emotions and this can lead to huge mistakes that cost you a lot in the volatile forex market. Hence, you should take some time to study trading psychology and practice mindfulness to manage your emotions. Trading with a calm and composed mind is very important to make rational trading decisions.

13. Take Breaks

Even though the forex market runs round-the-clock, it is not feasible to trade all day long. You need to take breaks and relax from time to time or else you won’t be able to concentrate on the trading process. Even if you don’t feel tired, you should stop trading when you encounter consecutive losses. Taking a break after a winning streak is just as important to save yourself from overtrading.

14. Gradually Add More Funds

When you gather some trading experience, you can start adding more funds to grow your capital and even better if you can use the gains from your winning trades. But before this, you need to develop confidence in your strategy and trading skills. If your trading system is good enough to generate consistent profits, you can start increasing your position size gradually.

15. Don’t Try To Beat The Market

Some traders become arrogant after a series of wins and this overconfidence is dangerous. No traders should try to beat the market as it is very much like swimming against the current in a stormy sea. Respect the trend and accept your mistakes instead of blaming them on the market.

By following these simple tips, you can ensure a secure and rewarding trading experience in the forex market, which ultimately leads you to long-term success.