9 Powerful Tips For Trading Forex Like A PRO

As per the study and research done by Professor Robert, there will be around 14.5 million traders in 2023 who will actively take part in the forex market. If we compare this number to the global population figures, one out of 561 global citizens will be exploring online forex trading in one way or the other. But the success rate of traders in forex is significantly less as only 10-15% traders become consistently profitable in the long run.

The number one reason behind this low success rate is the initial mistakes that we make as beginners in the forex space. But those who learn from these mistakes will surely get success sooner or later. But there are some important points that one needs to keep in mind when starting out as a trader. Hence, today we will be providing you 9 powerful tips for trading forexwith a professional mindset.

1. Keep Your Trading Goals Realistic

We all know that forex trading is a lucrative venture and many newbies enter the forex market with a goal to get rich overnight. But those who have enough knowledge about the volatile nature of the currency market will agree to the fact that overnight success is far from achievable for an average beginner. It takes a fair amount of time to learn about the fundamental and technical concepts of trading. 

A beginner can’t complete the learning process in a day or two. It also takes time to develop essential skills as a trader in the forex market. So, if you are starting out, then make sure not to have any unrealistic goals or expectations about the trading results or profits in the first place. Keeping realistic targets and trading goals is an essential quality for becoming a professional and successful trader in the long run.

2. Have a Plan and Stick to It

There is a famous quote that says, ‘A goal without a plan is just a wish!’. This applies to almost every field including forex trading. Just having an achievable trading goal is not enough for becoming a profitable trader. So, having a well-defined trading strategy is an integral part of a successful trading journey.

You should plan beforehand about your trading style, strategy and analysis methods. Establishing a set of rules that you would follow for trading is the first step in the direction of success. You need to make sure that you stick to that plan till the end as consistency and discipline can take you a long way.

3. Take Time to Choose a Forex Broker and Trading Platform

The online brokerage for trading platform that you choose for trading forex will have a crucial role to play in your overall trading and trading results. Joining a fully functional and feature-rich trading platform is a must for getting a seamless trading experience. Also the forex broker you choose should be a trusted one providing solid trading conditions such as tight spreads, low commission and good customer support.

You need to make sure the trading platform and broker is compatible with your trading style and strategy. You can check the platform functionality and trading conditions by testing your strategy on the demo account offered by them. Demo trading is something that no beginner should skip as it can be used as a learning tool to practise without being exposed to the market risk.

4. Be Consistent With Your Methodology

The methodology you use for trading forex is made up of various methods that you will be following to determine the ideal trade setups for your strategy. The trading methodology or strategy can be used as a guide which gives you all the answers you would need in day-to-day trading. The process of making trading decisions will become easier when you have a well-defined methodology to support the decisions for a given market situation.

For instance, some traders follow a technical methodology where they make decisions solely based on the data they get from price charts. They recognise ongoing and upcoming market trends from the chart patterns and enter trades based on the technical analysis. But some traders look closely at the fundamental side and act on the basis of economic data and news releases. You can also use a combination of both which is ideal for assessing the sudden volatility caused by news events.

5. Determine Optimal Entry and Exit Points for Your Trade

The result of each and every trade position you take will greatly depend on the entry and exit points you choose. You should take the position at the right time and the right price and should try your best to exit at the right time with an optimal price. Make sure to plan your exits for both situations whether it’s a winning trade or a losing trade.

Many traders get confused with the charts, as charts of different timeframes give different signals. For instance, a daily chart may tell you to sell the currency pair while a weekly chart gives you a buy signal for the very same pair. So, you should wait until you get confirmation for the trend and signal before taking a trade position.

6. Calculate the Expectancy of Your Trading System  

Expectancy = (Percentage of winning trades * average win) - (percentage of losing trades * loss)

This simple formula can be used to calculate the expectancy of your trading system which tells about the efficiency and reliability of the system. The result you get after applying the expectancy formula is the profit you can expect to earn per trade by following the current trading system. This will tell you if the system is good enough at the moment or if you need to work on improving it further for better profitability. But the expectancy is subject to changes as the market conditions are dynamic and volatile. Still, it gives you an idea about what you can expect from a trading system that is running successfully. 

7. Pay at Most Attention to Risk Management

Trading forex is a very risky venture owing to the volatile and unpredictable conditions of the currency market. Hence, even the best trader is always exposed to the risk of losing money in the process of trading. It is impossible to avoid losses as they are part and parcel of the process. But you should work on risk management to minimise these losses and improve your profitability. A risk management plan will consist of the following elements.

• Risk/Reward Ratio : Setting an optimal risk/reward ratio is the first step for managing your risk in online forex trading. Risk/reward ratio tells you about the maximum reward you can earn for the risk that you take with each trade. Ideally a higher risk/reward ratio would make you profitable even if your win rate is lower. Similarly a lower risk/reward ratio would mean you will have to maintain a higher win rate for earning a decent amount of profits with the risk you take.
• Position Sizing and Risk Per Trade :  Position sizing is another important component of risk management in fx trading. Taking positions that are too large for your account size would add up to the risk making you prone to losses. Similarly if you end up taking positions that are too small for your account, that would result in under utilisation of your trading capital. So, optimal position sizing is a must for managing your risk and allocation of capital in trades. The position size also tells about the risk per trade which is another integral part of risk management. The golden rule is to never risk more than 2% of your trading capital in a single trade. This allows you to limit your losses and safeguard your capital.
• Stop Loss Orders :  Stop loss orders are another important part of risk management as they allow you to trade freely without worrying about losing too much in a particular trade. A stop loss order is placed to automatically exit a trade when it goes to a loss making point. All traders have different levels of risk tolerance and the maximum amount of loss one can bear with a trade would greatly depend on their risk appetite. So, you need to determine the perfect exit point for a trade when it goes against you. This is more like preparing for the worst case scenario in advance which is the very essence of risk management in fx trading

8. Be Careful With Leverage

The leverage provided by forex brokers is a powerful tool that makes forex trading appealing to many beginners. It allows you to manage and trade with a greater amount of money than what you have in your account. Usually most brokers will give leverage when you meet the minimum margin requirement specified by them. It is the same as trading with borrowed money to accelerate your trades and profitability. For instance, if you avail a leverage of 100:1, it means you get to trade with $100 for every $1 of your account.

But one thing you have to keep in mind while using leverage is that it not only amplifies your profits but will also add to your risk of losing more. That means there is a risk of losing more than what you already have in your account. Traders are always told to never risk anything more than what they can afford to lose and one should use leverage keeping this advice in mind. But this does not mean that you should totally avoid leverage as it is an important step for taking your trading to the next level. Leverage benefits all traders and especially those traders who have less capital to start with. Another tip we can give you here is opting for a broker who provides negative balance protection as that will limit your risk to a great extent.

9. Keep a Trading Journal to Track Your Progress

The last tip we have for you in the list is to keep a trading journal to track your progress as a trader. A trading journal is like a diary and track record of your trades which can be used as a tool to assess how far you have come from where you started. Referring and reviewing your past trades is a good practice to identify your mistakes in time. Learning from mistakes and correcting them before it’s too late is very important for attaining success as a trader in the forex market.

We also suggest you to keep journaling your trades on a daily basis without fail. As this practice can also be good for building trading discipline over time. You should also take some time to perform a weekend analysis when the markets are closed as that will help you to assess the last week and prepare for the next week too.

One bonus tip that we can give you for becoming a successful trader is to never stop learning. Keep expanding your knowledge and polishing your skills as you gather more experience in the forex market. You can check out other free online guides to forex trading in your free time as they provide a lot of information that is useful for beginners. You should not beat yourself up for mistakes that you make as long as you are able to learn something from them. There is no need to rush the learning process as all of us have different capabilities and skills. Take your time to grow and go at your own pace. Remember that long lasting success always takes time and looking for shortcuts will never be the right thing to do for getting long term success as a forex trader.