The foreign exchange market is the largest across the globe, overshadowing the bond and stock markets. While trading forex may be easy, doing it well and generating profits can be a difficult task. Here are some tricks you can leverage to become a successful trader.
Beware of Daily Pivot Points
Tracking daily pivot points is crucial for different traders like swing, position, long-term, and day traders. Pivot trading can be used as a form of prediction. Often, markets find resistance, support, or fluctuate at pivot positions because numerous traders place orders at those positions. When notable trading moves result from pivot positions, it could be because many traders have placed trades expecting certain moves.
As a trader, pivot trading should not be the core of your trading strategy. However, you should watch pivot points for signals of potential market swings and or trend continuations. Consider pivot positions and the resulting trading activity as a validating technical indicator that you can leverage with your trading strategy.
Preserve Your Capital
Avoiding losses in forex trading is more crucial than making huge profits. To succeed in forex trading, you must learn how to preserve your capital. According to Paul Tudor Jones, founder of Tudor Corporation, a highly successful hedge fund, “the most critical trading rule is to maintain high defense.” Maintaining defense helps traders preserve their capital. Often, unsuccessful forex traders are unable to continue trading because they run out of money before entering a profitable trade. Traders can preserve their capital and increase their chances of making a profit by adopting high-risk management rules. Paul Tudor’s approach encourages traders to avoid losing all their money until a highly profitable opportunity appears.
Trade with a Margin
Successful traders will only risk their investment when they spot a margin in the market, which increases their chances of profiting from their trade. A margin can be buying at a price position that had earlier signified market support or selling at a price position that you consider a strong resistance.
Traders can increase their margins or chances of success by adopting various technical indicators. For instance, if the 50 or 10 periods MA (moving average) all meet at the same price position, that action should offer enough resistance or support for a market.
A similar margin that converging technical indicators present occur when different indicators on diversified time frames converge to offer resistance or support. An example, in this case, could be the price nearing the 50-cycle MA at the 15-minute interval at the exact price level where it is hitting the ten cycle MA at the 4 or 1 hourly chart.
Have a Plan and an Objective
To win in forex trading, you must set a goal. Determine how frequently you’ll be trading. Will you focus on low reward or low-risk stocks? Do you plan to risk a considerable amount to make huge profits? Forex trading experts encourage traders to take time to plan their trading style and strategy. Without a robust plan, traders are likely to lose large sums of money.
Have a Passion for Forex Trading
Without a passion and interest for forex trading, your chances of succeeding will be minimal. Forex trading is a complex industry with a never-ending learning curve. If you are not passionate, you will neither understand the various concepts nor be interested in learning. To succeed in the forex trading industry, you must be ready to learn. Consider getting a mentor from whom you can learn some of the most effective trading styles. Learning from experienced professionals helps you develop your trading style and personality.
Be in the Right State of Mind
Psychological matters are some of the most ignored in forex trading. Often many traders rely on their trading system or method and forget to work on their minds. Often, many foreign exchange traders make mistakes depending on their perception of the markets they are trading.
To succeed in forex trading, you must be in the right state of mind, without which trading will always be a daunting task. Traders can work on their minds by researching widely, reading relevant blogs and books from experienced traders, and practicing demo accounts. These tips help them learn from professionals and improve their trading skills.
To succeed in forex trading, you need to be disciplined, organized, and prepared to learn and make improvements regularly.