5 Tips That All Forex Traders Should Know | Everything Trading

Trading Blog

5 Tips That All Forex Traders Should Know

Jan 4, 2019 | Blog

What is Rollover In Forex Trading?

Tip 1) Don’t Follow The Crowd

Tip 2) Control Your Emotions

Tip 3) Have A Trading Plan

Tip 4) Don’t Let The Losers Run

Tip 5) It Takes Time To Become A Successful Trader

 

Becoming a professional trader is harder than it first appears. As we all read in the newspapers and see on TV and in the movies, the city guys of Wall Street and London all seem to live a money fuelled life. They eat in the best restaurants, live in the best apartments or houses, and can afford many of life’s luxuries that are not available to the everyday person. Becoming a trader to inject a second income is a smart choice for many but it takes hours of dedication to succeed. 

 

 

Tip 1: Don’t Follow The Crowd

The financial markets are driven by emotion – mainly fear and greed which in turn drives supply and demand. One of Warren Buffets most famous quotes is “Be fearful when others are greedy and greedy when others are fearful”. This quote rings true to many a trader and can be the reason why markets trade the way they do. When markets become overbought and traders become greedy, there tends to be a reverse in the markets. Conversely, when traders are fearful and sell the market, there tends to be many bargains on the table as solid assets become on sale at a discount. Some brokers publish statistics that show where there traders are buying and selling in the market, this is also known as the sentiment index and well worth a look. If 80% of retail traders lose money then it would be wise to do the opposite to the herd to increase chances of making money. 

 

 

Tip 2: Control Your Emotions

Controlling your emotions is one of the key components to becoming a successful trader. The psychology behind trading is complex in itself as each and every trader learns so much about themselves and their ego when trading the financial markets. Some of the key psychological components such as greed and fear are most often mentioned alongside discipline and risk management. Always remember that the market is your boss and you should always respect that fact as it will never change! Chasing losses and changing your trading plan could land you in deep trouble. Always exercise that discipline and respect the boss!

 

 

Tip 3: Have A Trading Plan

Having a trading plan before execution is paramount to successful trading. Excellent traders often go through phases where they have so much recent success that they begin to exert a cockiness streak which can lead to carelessness. They can forget why they entered trades in the first place. This is a dangerous zone to be in. Every trade that is entered needs to have a strict reason for entry and exit – why did I get into the market at that price? Did I like the price action? Do I like that level on the chart? Where do I get out of this trade?

Great traders know why they are in the market and when they want to get out. They do not deviate from that plan and execute the plan time and time again. They are comfortable with losers because they know their plan will come good on the next trades.

 

 

Tip 4: Don’t Let The Losers Run

A large percentage of retail traders hang themselves in the market as they let their losers run. Think about this… if you place ten trades and make £100 each on nine trades, that’s £900. This can all be reversed on the tenth trade if your discipline goes out of the window! Imagine on the last trade you are losing £200 and then double down on the position which goes against your original plan. Then the market quickly goes further against you and you again decide to add to your position. You have now tripled down on a losing trade. You could finally give up on the trade and close out at £1000 loss as your loss amplifies quickly. Based on the previous nine trades of £900 profit this one trade would mean the account would still be £100 negative with the £1000 loss. This is even when the trader is 90% correct on your trades and let only one loss run against you! All the hard work from the first nine trades goes to waste because that discipline was lost. Please do not be that trader that lets losses run as you will never be successful over the long term!

 

 

Tip 5: It takes time to become a successful trader!

Keep in mind that it is possible to make money from day one of opening a trading account. However, for long term consistency (which is what every trader aspires too) it takes time and like anything else… much practice! Like any skill, if you learn from your mistakes quickly, then you will learn quicker. This is why it is so important to put your ego aside and let the market be your boss! Try not to make the same mistake twice. Take your time to learn charts and try different technical indicators. Take your time to learn price action. Take your time to learn speculative sentiment to weigh up when a market is overbought or oversold. The book called Outliers by Malcolm Gladwell states that it takes 10,000 hours of practice to become an expert at anything. Trading is no different. Take time to study the market and then let the fruits of your labour flow!

free forex course banner

Sign up for a free membership to unlock:

  • Lesson Tracking
  • Lesson Quizzes
  • Lesson Videos
  • Course Certificate
What Is Spread In Forex?

What Is Spread In Forex?

What is the 'Spread' in Forex trading? The spread in Forex is the difference between the ‘buying’...