Below are some expert trading tips for forex traders, courtesy of SKY FX PRO
- ALWAYS trade in the direction of the trend. In Forex markets we see great trends in currency pairs that last for a long time (cycles). Therefore, it pays to identify the dominant trend of currency pairs. Going against the trend will cost you a lot of money and destabilize you emotionally.
- Plan your trade, trade your plan. Trade plans can be made well in advance in the Forex market and help eliminate emotional trading. The more mechanical you become in entering and exiting trades, the more profitable and consistent you will become in the long run.
- Before initiating any trade, always know your risk and truly accept this risk. The risk is defined as the number of pips from your entry to your stop loss.
- Always, use a stop loss after initiating a trade. Placing a stop loss does not essentially mean that you are expecting to experience a losing trade but will help minimize losses against unforeseen market circumstances caused by unforeseen events such as terrorist attacks, geopolitical events etc.
- After initiating a trade, a trader must have clear trade management guidelines for that trade. Trade management means that the trader knows in advance when and where he or she will move the stop loss and when to scale out of part of the trade and eventually where to take profits.
Whilst trading Forex, it is imperative for a trader to know the characteristics of the currency pairs he or she likes to trade. A way of achieving this is by looking at the past behavior of the currency pairs in order to ascertain key characteristics such as:
- How well does the pair trend?
- Which economic events influence the pair?
- What is the Average Daily Range of the pair? etc.
- Always keep in mind that the Forex market presents the trader with a constant stream of opportunities, therefore, if the trader experiences more than 2-3 consecutive losses, stopping to trade for a period of time is advisable. This will give the trader time to refocus and examine mistakes and prepare psychologically to re-enter the market again.
- Trade to profit and not just to trade. Many traders think that because they might sit in front of a trade station for a period of time it is logical that they should be trading constantly. A trader should only initiate trades once all the odds are stacked in his favor and he has an edge. Then and only then can trade be initiated. Patience and discipline is an integral part of successful and consistent trading and are traits that a trader must endeavor to possess.
- All successful traders have a trading diary that contains all the trades good or bad they have ever initiated. This gives traders the opportunity to constantly evaluate their performance and rectify any identified mistakes.
- All successful traders are constantly learning and evolving. Just when you think you know it all about trading, a new curveball gets thrown your way. Furthermore, as time passes by, new methods of making money are developed and need to be learned about.