10 Essential Forex Trading Tips For Trading Forex Successfully
The process of trading currencies of different countries against each other is known as forex trading, where Forex is an acronym for Foreign Exchange. For instance, Euro (EUR) is the currency in circulation in Europe, and US Dollar (USD) is the currency in circulation in the United States of America.
Here, a perfect forex trading strategy is to sell the US Dollar at the same time while buying the Euro. Being a forex trader, you can select a currency pair of your choice and place a trade accordingly that you anticipate will have a value change.
To make the best out of the foreign exchange trade, top forex traders do a number of things. The following are the 10 vital points that you must focus on for good forex trading.
1. Learn the basics: Learning the basics sound very simple, but surprisingly the majority of the beginners in forex trading does not know to calculate the pip value (the smallest possible price change is the pip value).
2. Invest appropriately: You must only invest the amount of money that you can afford to lose because the amount of money you lose must not affect your financial status.
3. Divide the trading capital: You must divide your forex trading capital into 50 equal parts. Doing this ensures that you will not lose more than 2% on a single trade. For instance, if you lose 5 times in a row, then it is not a major concern, as you still have 45 additional opportunities to win the trade.
4. Do not overtrade: The majority of the inexperienced traders are overconfident after a few trade wins and are likely to lose a lot. As they tend to purchase more trades in a comparatively lesser period, they have a higher risk of losing. Therefore, if you lose twice or thrice consecutively, you must not trade for a couple of days, as the forex market will not disappear, but your account equity will.
5. Shape up your charts: Reorganize your charts so that you know what is happening and when, as you must know the price lines, support lines, and trend lines.
6. Keep it simple: You must only focus on a single or a couple of currency pairs. This reduces the stress and the risks of losing the trade.
7. Plan an exit strategy: You have to place a take-profit and stop-loss order when opening a position. Disaster can strike at any moment if you do not have an exit strategy.
8. Regular withdrawal: You must regularly withdraw some of the profits, as you may not enjoy long-term profits and are on the open ground of losing all the profits at once.
9. Trading plan: You must have a trading plan. A sound trading plan ensures good profits.
10. Calculate your monthly P/L: Lastly, you need to calculate your monthly profit/loss amounts, as this helps you become perfect for your long run forex trading venture.