A good number of new traders are trying their best to create a success story in the dynamic forex market. They are attracted to the currency market because of the ease of access and high profit potential along with the availability of high leverage to optimise the gains from trading. However, many of them end up being disappointed when they don’t get the desired results. They even complain and blame the market even if they were the ones at fault. Having unrealistic goals always leads to dissatisfaction in any profession and forex trading is also not an exception. There is indeed no limit to the money you can make from trading but it depends on how much you can afford to risk and how well you can manage the risk.
Those who know this fact can freely explore the global market by becoming a forex trader and reap the benefits. In this blog, I will be sharing 6 powerful tips that you can follow for maximising the benefits you can get from forex trading.
- Develop A Sound Trading Strategy
One key feature of the forex market is the flexibility as you get a lot of options to consider while making any decision. Since it is a 24/5 market, you can freely trade at any time by finding a trading session that works with your schedule. Because of this, the FX market is a favourite place for part-time traders who are unable to trade other major assets due to the fixed market hours. You can trade both shorter and longer timeframes by choosing a trading style that resonates with you. Having a set of well-defined rules and parameters makes trading easier and more efficient.
When all of these aspects come together complementing your skill level and aligning with your goals and risk tolerance, you will be able to develop a sound trading strategy to secure success. Whether the currency pair price is soaring or falling, you can always make profits by opening a position based on the direction of price movement. The price movements are tracked by counting the pips which is the unit to measure currency prices and you can use a pip calculator to convert the price change to your preferred currency with precision.
- Trade With A Trusted Broker
The broker you choose or opening a forex trading account is not only responsible for connecting you to the decentralised market but they are also in charge of creating a favourable trading environment for you. The user experience, trading conditions offered, execution of orders and even the amount that gets debited from your Forex account as spreads, commission and rollover fees depend on the pricing of the broker you pick as your platform provider.
You have to make sure that they are reliable before depositing your hard-earned money for trading on a live account. The best way to test the platform and get a glimpse of the trading experience is demo trading. It is a replica of a real account where trading is done with virtual funds and thus you can try it without any risk. You can also use it for practice and testing your strategy. Besides, you should give preference to regulated brokers and platforms that provide 24/5 customer support.
- Keep Track Of Your Trading Journey
No matter how much you prepare for trading and how well you plan things, you cannot expect yourself to do everything perfectly from the first day onwards. Because trading is a skill that takes time to develop hands-on experience is the best teacher in this regard. So, brace yourself as you will probably make a fair share of mistakes before figuring things out. But you cannot identify these mistakes in time without keeping track of your trading journey.
For this, you have to use a trading journal and record all the details about your trading activities on a daily basis. You can review the journal later and detect any mistakes that you made. The habit of journaling will also make you disciplined and consistent as a trader. You can also do some calculations in this journal to evaluate your trading performance. Tools like profit calculators can be used to compute the profits you earn at the end of a trading day.
- Focus On Technical Analysis
The majority of forex traders depend on technical analysis to determine the direction in which the market will move in the selected timeframe. You should also consider fundamental analysis when there is an important economic event or data release but technical analysis is more precise and easy to comprehend once you master chart reading. Finding optimal entry and exit points is essential to get the best possible results from your trades and technical analysis is the best method for this.
You just have to follow the price action and add some simple indicators to the chart to get additional information. If you add too many, you are going to become confused with the mixed signals you get from different indicators. The indicators that I suggest for beginners are Moving Averages and RSI. The support and resistance lines are reliable. If you want to trade convergence and divergence, the MACD indicator can give valuable insights.
- Prioritise Risk Management
You can never get rid of the risk in forex trading and a trader must be strong enough to endure it without being affected. For that, you have to determine your own risk appetite, which is the level of risk that you are comfortable with based on your financial situation, trading style and the amount you are using for trading. After this, you have to come up with a solid risk management plan that keeps your potential losses under a limit. Because the probability of a loss is always there with every trade.
But you can’t trade forex while being risk-averse as the reward is the result of the risks you take. However, you should not be risking more to gain a bigger reward.
Just take calculated risks and eventually, you will be able to make consistent profits. Trying to take a huge leap is not the best approach in forex trading, just take small cautious steps and always prioritise risk management. After all, our success in forex trading depends on our ability to transform the risks into rewards.
There are many ways to reduce your risk exposure and one of them is limiting the risk per trade to 1% or 2%. 2% should be max in my opinion. However, those who have high-risk tolerance often risk 3% of their account balance. In any case, you should set a definite stop loss to exit losing trades without losing much. You should trade with a favourable risk/reward ratio greater than 1:1 or 1:2 for maximising the profits of the winning trades while minimising the potential losses.
- Take Advantage of Forex Broker Promotional programs
Forex brokers often provide special offers as a part of their promotions. Some brokers have deposit bonus programs for leveraged accounts when you deposit a minimum amount. Some brokers also have referral programs through which you can earn a reward for referring the broker to other traders. You may also see other free or discounted services that are provided to new clients. So, you can check if your broker also has any such promotional schemes that you can avail.
But you have to check the terms and conditions and should not be choosing a broker just because of their promotional programs. We need to understand that the benefits you get from promotions are just a bonus and we are not joining the forex market just because of a promotion scheme. Take your time to go through the platform they offer and ensure that the trading conditions are good enough. After this, you can look for promotional programs that can benefit you while opening an account with them.
Conclusion
Last but not least, I want to share a bonus tip that can help you get additional benefits from forex trading and that is about being adaptable. The digital era never fails to surprise us with new inventions and the world of trading is also expanding as a result of modern and innovative trading solutions. We have to adapt and embrace the changes to thrive in the ever-changing forex market.
