Each and every day thousands of newbie traders are joining the biggest financial market of the world with one dream in common – “get rich & get the world”. That is not a bad move at all! A right trading approach can obviously bring you whatever you want. The sad news is, most of the traders fall into the trap named “shortcut” while running towards their goals and that is the exact reason why they fail to reach their planned destination most of the time. In this article, we’ve tried to highlight and explain the seven best practices to turn yourself as a successful trader.
- Build a compatible and proven trading strategy: You’ll find thousands of free indicators and tools over the web to build your own trading strategy. Many traders get puzzled at the beginning by trying too many indicators at a time or by frequently changing their trading strategies. We recommend you to stick with one simple trend-following trading strategy, master it, apply it at the demo trading, and analyze the performance and the backtest results. A strategy should be picked for real trading only after it proves itself as a winner for most of the time. That means you should be a winner for at least 6 times out of every 10 trades you make.
- Choosing the timeframes: This part is crucial because it helps you to define what kind of trader you really are. Traders using timeframes lower than hourly chart are considered as scalpers who look for short-term but frequent trade opportunities at the market. On the other hand intraday/day traders pick hourly to 4-hourly timeframe charts for mid-term market entries. Daily, weekly and monthly timeframe charts are being used by long-term traders who usually aim 1 or 2 good trades per week.
There is a long debate about which timeframe chart is better to trade. Market experts suggest newbie traders be focused on long-term charts because such timeframes offer you fewer trade opportunities but carry the better quality of signals along with the greater probability of success. What happens in shorter timeframe charts? Aren’t they profitable too? We’ve asked the same question to M I Ahmed, a senior forex trader. He said, “Short-term traders are also profitable but such charts produce frequent trading signals. Whenever there are a lot of signals in a short period of time, there are also chances of encountering frequent bad or false signals. That’s why we recommend scalping to experienced traders who can handle the challenge of frequent trading.”
- Find a legit Forex Broker: Before you plan to open a real account and trading with the real money, we suggest you look for a well-regulated broker to ensure the safety of your capital. Look for their license details and if they are regulated by any renowned international financial organization like NFA, FCA, FSA, CySEC etc. Besides, you also need to be concerned about the spreads, commissions, swap charge, deposit and withdrawal fees offered by the brokers. As a trader, it is ideal to look for a broker with tighter spreads and lower commission charges. Many brokers offer SWAP or commission-free accounts and apply no charges on deposits as well as withdrawals for their clients.
- Stick to your plan: Once you are set with your trading plan, just stick to it. You may encounter several losses at the beginning but never change your strategy or modify your trading plan based on a sudden losing streak. Jumping from one strategy to another within a very short period of time will lead you to nowhere near the success. We recommend traders to try their trading strategies constantly for 1 to 3 months with strict discipline to come to a final decision whether it’s working or not.
- Look at the macroeconomics too: Always remember that forex trading is more than charts where you can buy and sell. We deal with currencies we are using every day and these rates are affected by various macroeconomic and geopolitical affairs. It’s always advisable to follow the fundamentals behind the currency so that you can have a picture on your mind of where the currency is heading in mid-term to short term. Fundamentals give you the idea about the long-term direction of the market.
- Avoid overtrading: Overtrading can simply be enough to destroy your trading account within a very short period of time. It happens when traders take forex trading as a “get rich quick scheme”. Well, sometime frequent trading may bring quick profits but ideally not for the long run. A higher quantity of trades may lead you to a higher number of losing trades and make you frustrated enough to make further mistakes. Less trading lets you focused on better trade setups and dramatically increases the quality of the trades hence, increases the probability of success.
Setting up the trading goals: The trading market is like an ocean, you can roam here but to survive, you should have a well-planned reliable route that leads you to your dream island. To assess the target, you can rely on your demo performance which gives you a projection about how far you can go over a year or five. A realistic goal helps you to remain disciplined and stay on the right track until you reach your landmark. Contrarily, aiming unrealistic goals, even you try to get super rich so fast, it is pretty much obvious that you’ll find yourself blown away at the end. It is same as other business, you will have difficult times and you will gain some % on your capital consistently if you are successful. The larger the trading capital, larger will be your $ return. Starting with 1K and trying to make $200 USD every month seems less practical and less professional but monthly $200 return on $5000 account is less risky and practical. Starting with small capital and taking higher risk to make big profits is one of the most common mistakes of every amateur traders
The bottom line
Unprofessional retail forex traders are obsessed with charts and some subjective lines expecting to turn into big boys but that is not how trading in the financial market works. Be realistic, spend sufficient time at the market, master your trading strategy, and stick to your plan at the road to success.