Something that every single forex trader should be looking to do is to improve, there is no real end goal when it comes to trading and so you should always be looking to improve your trading. This can however be a lot easier said than done, especially when you are in a routine, it can be hard to break out of it and to improve any further. So we are going to be looking at 10 simple ways to improve your forex trading, some you may already be doing, others maybe not, consider the next time you start trading to see if they can help you to take the next step.
Use A Demo Account
A demo account can be a wonderful thing and something invaluable to you as a trader. We cannot say how many times we have been saved by simply using a demo account, or the number of traders that have come to make realisations about their current trading strategies by testing them on a demo account first. Practice, practice, practice is of course quite a famous and in this case accurate phrase.
95% of all forex brokers will offer demo accounts to their clients and you should be taking advantage of them. A demo account will try to mimic the trading conditions and market conditions as accurately as it can.
This gives you the perfect place to test out your new trading strategy or any changes that you have made to your current one including things like a change to your risk management. You won’t find successful traders that have not used a demo account at some point in their careers.
We understand that it can be boring using the demo account, or that it can make a lot of time away from you potentially making a little extra profit.
What you need to consider though is that you are using this demo account to ensure that your current strategy actually works, if it does then that is great you can move it onto a live account, but if it doesn’t work, you have potentially saved yourself a large chunk of your balance and capital.
You should be using a demo account until you can consistently make a profit over a longer period of time. Use your technical analysis and fundamental analysis on the demo account before moving onto a live one, use the demo account as much as you can, your balance will love you for it and in the long run, you will be very glad that you did.
Learn A Single Strategy First
There is a lot of information out there when it comes to forex trading, so much so that you can get a little lost in it all. So it is no wonder that a lot of newer traders can get confused as to what they need to be learning next or what they should be concentrating on.
One thing that you need to be doing, is learning your first trading strategy and learning everything that you can about it before you think about moving on to a new trading strategy.
You need to learn the best entry and exit points, which currency pairs work best for it, how the price movements affect it, which indicators are best to use, what types of analysis work and more. Pretty much everything that you can.
Only once you have learnt all that you think that you can, should you begin to think about a new strategy. Don’t make the mistake of trying to learn too much too quickly, that will only end up hurting your overall profit.
Of course, you need to learn more, but do it one step at a time, and of course, once you are learning about your second trading strategy, learn what you can about that before thinking about a third.
Use Only The Money You Can Afford to Lose
This is the golden rule of investing of any type, only use what you can afford to lose, as soon as you start to use money that you actually need, you will be putting yourself in a position that you really do not want to be in. 7
Forex trading comes with its risks and it is wise to consider any money that you have deposited into your account as being lost until you manage to withdraw it. The problem with using money that you will need is that every trade that you make will have an added level of stress involved. It is not wise to use the money that you need or to borrow money to try and make money, not with any walk of life.
Before you deposit anything, consider how you would feel should you lose that money. If you think you would be upset, or that you would have needed it for food or rent, then do not deposit it. Only deposit if you know that it won’t have any form of negativity on your life, at least not in regards to your needs.
This I a mistake that a lot of new traders make and they put themselves into very desperate situations. Once you have lost money, you will want to get it back, this will make you desperate, you will use more money, lose more money and then begin a downward spiral which is very hard to get out of. So simply do not do it in the first place.
Fully Learn And Understand Your Trading Platform
The trading platforms that we use are the lifeblood on your trading, it is what allows you to place your trades, to do your analysis and ultimately can decide on your overall trading performance.
It is how you gain access to the forex markets and yet many traders don’t take the time to fully learn and understand how the platform really works. They use the base layer options, never going any deeper even though there will be tools and indicators that could really benefit their trading.
Imagine a chess player that doesn’t know how to use the castle piece, they would be at a huge disadvantage and their performance during the game will of course suffer. Learn all of the tools available to you, the different entry options, exit options, the available indicators, the charts, timeframes, currencies available, how to perform both technical and fundamental analysis, how different strategies can be implemented and anything else that it can do.
There really is no point in trading if you do not understand how the platform works. So before you place your next trade, have a read up on what the platform can do, learn something new, even just one new thing a day will be a huge benefit and you never know, something that you learn next may help you to prevent your next losing trades.
Choose the Right Forex Broker
Don’t get us wrong, changing your forex broker won’t suddenly make you a better trader, but it can make a world of difference to your overall trading performance and results. What we mean by this is that every broker offers different trading environments where the markets are offered at slightly different levels.
Look at things like the spreads, the commissions and any other charges that may be put onto the account. If you can manage to reduce the fees that you are paying, even by a little each trade, it will begin to add up and your overall profits at the end of the month could look a lot healthier, even without any additional winning trades.
You should also consider that different brokers have different servers and so the price movement on each broker may be slightly different, meaning that if you are a scalper, some brokers will be far better for you than others.
Create A Trading Plan
A trading plan is vital if you want to be profitable and successful as a forex trader, especially for the long term. A trading plan should help you to better understand your trading strategies, risk management, a risk to reward ratio, entry and exit points, predicted profit, and which currency pairs you trade.
Yet this is something that many traders start without creating one. You should not trade forex without a trading plan, the forex market will eat you alive, and that is what a lot of forex traders find out the hard way.
Sit down, take a few days or weeks to really think about what you are doing and why you are trading. Devise your plan, you should not place another trade without one.
Clearly define which strategy you are going to be using, how you are going to be managing your risk, and every other aspect of your trading career. If you wish to be profitable, then you need to have a plan in place. We cannot say that anymore.
Learn When To Take A Break
Taking a break can actually do wonders for your trading and your trades and your results. For many traders they will sit at the screen for hours on end, staring at the markets hoping that their next winning trade will pop out at them.
The problem is, that the longer you sit there, the harder it will become, this also goes along with the times when your trade loses. Each loss will frustrate you more, this frustration will build and build, you will become more desperate and you will start to place more and more bad trades.
This is why taking a break is so important. Take a step back, away from your trading platform and the markets. Maybe even take a day to break, after all, there is no reason why you need to place trades every day.
Clear your mind and come back with a fresh outlook. Knowing when to take a break, knowing when your frustrations are building or that you are blankly looking at nothing is incredibly important.
Having a break will make it easier for you to land, to spot the current trend on your favourite currency, every forex trader needs to take breaks, so there is no reason why you should not too.
There is nothing worse than trying to do a little bit of analysis or to place a trade and then something distracts you just as you are inputting your figures, you mistype a single digit and end up placing a 0.1 lots trade instead of 0.01 lots. You have now put your account under a lot more risk than you had planned, something that could easily have been avoided.
When you set up your trading room, you need to ensure that anything that could cause a distraction is removed, this could be your Tv, a radio, even a brightly coloured plant. If it can distract you, get rid of it.
This also goes for programs on your computer, try and keep them to a minimum and remove their icons from your desktop, this will help you from clicking on them and being distracted by them.
If you want to b profitable then you need to get rid of those distractions.
Set Realistic Goals
Goals are so important when it comes to being a successful forex trader. We do, however, need to ensure that the targets that are being set are realistic, they are something that you can actually achieve.
We all want to make $100,000 every single month, but how many people will actually be able to achieve those sorts of numbers? Not many at all.
Set your targets small to begin with and then work your way up. The forex market isn’t going anywhere, so don’t try and rush your success. Plan for a small profit each day or week, to begin with, then increase it to larger amounts.
If you try to push yourself too much too quickly, you will start to make mistakes and place trades that you probably shouldn’t have.
Having smaller targets will also help to motivate you. Each time you achieve one you will want to progress to the next, having one large goal can make it seem like you are making no progress at all. So set them small and set them realistically.
Always Be Willing To Learn
There is always something else to learn, not a single trader in the world knows everything that there is to know about the forex markets. You simply cannot learn everything, and that means that there is always something new to learn.
Do not be afraid to look up new things, every time that you learn something new, you are adding a little extra to your trading abilities. Try and learn something new every day, your trading education is invaluable and is the thing that can really help you to be profitable.
Use a demo account to test out some trades that you probably would not have placed otherwise. Try to learn a new currency to trade, a new risk management style, new strategies, look at different charts and timeframes, just look for new ways to improve, it is as simple as that.
Never think that you know everything, you do not, so always be eager to learn a little more.
There are always things that you can do to improve your trading, we will never be perfect forex traders, no one will be. Think about your own trading, what parts can you improve? What parts do you feel you are good at, even those bits can be improved further.
What tips do you have that helped you to improve your forex trading?