Although many people enter the Forex market with the idea of becoming a millionaire, it is more difficult than simply opening and closing trades. Just one number: over 90% of traders are known to lose money in the first six months.
However, with the right combination of commitment, study and advice, you can avoid the guillotine and become a successful Forex trader. In this article, we will give you the best tips and tricks for short-term forex trading.
Because, as American singer Kenny Rogers said in his song The Gambler, "If you want to play, boy, you have to learn to play it well".
Also known as day trading , short-term trading is a popular investment technique that involves open and closed trades and positions over a short period of time, usually within the same day.
Most traders find it very attractive due to the profitability associated with the practice. However, it can also be dangerous as it often includes poor risk management and exposure to fluctuations and high volatility.
It provides relatively smaller gains per position but has a higher trading frequency. Eventually, it produces a good amount of seeds every day.
Should you choose short term forex trading or long term forex trading? There is no single answer to this question as it pertains to your trading skills, your psychology and the money associated with your trading account.
The best tips and tricks for Forex trading
In the investment market, it all depends on your trading style and personality. However, most of the best short-term forex trading tips and tricks will be related to tools that will help you stay in control of your position and, therefore, your portfolio.
Here is a list of the best forex tips, tricks and advice that can help you in your trading performance.
1. Know yourself and the type of trader you are
Getting to know yourself may be seen as an obvious task, but it's not. As every market is different, so is every trader. You have your own personality, emotional reactions and goals.
Some traders are more comfortable with low-risk positions like a safety net, but others like the adrenaline of betting against the market. Who are you? If you are the type of person who likes to follow people and leaders, perhaps you would like to be a trend trader.
On the other hand, if you are some kind of renegade person who is always looking for a different approach, a hidden agenda or the round pegs in the square holes. Hence, you would be better suited as a reverse trader. So keep this in mind as you develop your skills.
2. Choose the best trading platform for you
There are thousands of brokers in the industry and each is different from the other. Some brokers are better for novice traders and others are excellent choices for experienced investors.
Do you want automated trading ? Do you prefer to be more protected in terms of regulation? Or do you like trading on the go with mobile apps? Ask and serve accordingly.
Each broker has their own solutions, fees, base currencies, and deposit and withdrawal processing times. The best option to check is to look at the broker comparison tables and after selecting one, open a demo account to test all the broker's features.
3. Gain experience in more than one trading strategy
Mastering the Forex market should be your premise when starting your investing career. You should learn more than one trading strategy that suits your trading skills and styles.
This way, you will see the market with a more holistic approach . This does not mean that you will be using hundreds of technical indicators, which is not recommended. But it can help you if you have different strategies to choose the best trading plan at all times.
4. Start with a telescope and finish with a microscope
It will help your trading performance if you know what the current market tone is. For this, it is good to start your analysis from a larger time frame such as weekly or daily charts, then move to shorter time intervals such as 1 hour, 15 minutes, etc.
This way, you will understand the whole trend and the direction in which the market is moving. Hence, you will be able to identify potential short-term opportunities in market situations such as support and resistances, overbought or oversold conditions or when it is not a good idea to go short or long.
Remember, the trend is your friend, even if you are a contrarian trader.
5. Check the correlations
Correlations are a powerful tool for confirming trades but also for potentially doubling profits . Use currency correlations to your advantage and to assess the risks and profitability of traders.
Statistical correlation speaks of the relationship between two assets. It could be good, but it could also be bad. It means that when it is positive, one asset tends to mimic the other, for example the euro and the Swiss franc. On the other hand, when it comes to negative correlation, one stock is the opposite of another.
The positively correlated pairs are EUR / USD, GBP / USD and AUD / USD. Negatively correlated pairs are EUR / USD versus USD / CHF or USD / JPY.
Long story short, you buy gold and also sell DXY if the greenback is falling. For example, when you go long on the EUR / USD, it is natural to go short on the USD / CHF.
6. Make a trading plan
Trading plans are the roadmap you will follow when starting your position. It should contain entry and exit points, stop loss, profit taking and risk / reward ratio.
The plan will keep information on how much you are buying or selling, your potential profits, levels to watch, and ultimately provide you with an exit point in case everything goes wrong.
Having a trading plan is one of the main elements here in this list of Forex trading tips, as it will keep you on track with your goals. But you should also understand that the Forex trick is that you should follow your plan.
7. Protect yourself, manage the risk
Protecting yourself and your money is one of the cornerstones of your trading life. Remember that the market will open tomorrow, make sure your wallet is there too.
It is essential to calculate the risk associated with each trade and to know when to wait and when to start trading. The market offers opportunities every single day, don't rush!
Finally, understand that it is best to stop trading when you have a streak of losing days and take a few days off. It will clear your mind and you will be back on the market with a sharp brain. Last but not least, never trade without stop loss and limit the risks.
8. Work with facts, not emotions
It may sound simple, but it isn't. Trade what you see, not what you hope to see. Wait for the right time and keep your emotions out of the way. I know it's hard, but understand yourself and learn how to deal with yourself.
Two clever tricks for Forex trading are to keep a clear trading plan and keep a detailed trading journal .
9. Keep learning Forex and be on top of new technologies
As Isaac Newton once said, "what we know is a drop, what we don't know is an ocean." The Forex market is one of the most challenging businesses globally, but also one of the potentially most rewarding.
Forex is difficult because it changes every day every second. What worked in the past won't necessarily work now. It is imperative to continue to study and test the market with new strategies, research and both technical and fundamental arguments.
Keep an eye on technology and use it to your advantage. Try back-testing software, automated trading and technical indicators to improve your trading and research.
Finally, keep a good internet connection that supports your platform whenever you want to use it.
Do you want to learn more about Forex then check this website comoinvertirenforex.com.
|