The Forex markets offer plenty of rich opportunities for you to leverage large gains when you trade efficiently. However, many Forex players, whether they are novice traders or seasoned investors, at times struggle to achieve maximum performance. Often, they fall victim to short-term thinking, fear, over-trading and ignoring price action, among other factors. The six tips discussed below will help you overcome these obstacles and help You optimize Your trading approach:
- 1. Focusing on Daily Charts
- 2. Leveraging only the Most Profitable and Low-Risk Trades
- 3. Managing Your Capital Base
- 4. Streamlining Your Trading Approach
- 5. Emphasizing Price Action
- 6. Not over-trading
STICK TO THE DAILY CHARTS
Traders often make the mistake of trying to trade off charts showing price movements hourly or even minute-by-minute. This typically can be a recipe for disaster as these price moments are often unreliable and don’t demonstrate a true picture of the currency market you are trying to leverage. Instead, rely strictly on the daily charts of the currency pair you are seeking to exploit.
TAKE ONLY THE BEST TRADES
By focusing on the daily charts, you will be able to identify the most profitable trades both in terms of price action and risk. Learning to recognize and play these moves in the Forex market will help you to leverage great setups with confidence. Too often currency market players try to exploit multiple trades and end up coming away with nothing. Instead, learn to focus your efforts on those trades that will yield the greatest returns with the least amount of risk.
MANAGING YOUR CAPITAL BASE
Greed and elation can often cause Forex investors to bite off more than they can chew in the market. Because of this, it is imperative that you refrain from risking more than 3 percent of your account on a single trade. Risking more puts you in jeopardy of losing a significant portion of your capital on a single trade. Rest assured that you can always add more to a position as it proves profitable and you believe it will continue to work in your favor.
KEEP IT SIMPLE
Overtime it is important to develop a trading system that suits your approach. For example, learn which indicators and data points best suit your needs. It’s better to rely upon a simple set of factors rather than an exhaustive list, as this will only cause confusion and/or hesitation in opening and closing positions. Examine your approach through reflection and keeping a journal of your market activity. This will help you to rely more upon your analysis and instinct more confidently, thereby enabling you to seize upon opportunities.
TRUST PRICE ACTION
The tape never lies. In other words, regardless of how rigorous and thorough your analysis is, price action is the deciding factor in terms of profits and losses. Relying upon price action on the daily charts often is the most potent approach to leveraging gains in the Forex world. In the end, trust the tape.
PERILS OF TRADING TOO MUCH
Over-trading most often is the Achilles’ heel of most currency market investors. Most think the more they trade the more profitable they will be when, in fact, less is more. Identifying a few solid set-ups per day is often the best approach for winning in the Forex world. Trying to trade too much often results in wasted capital and empty accounts in the long run.