5 Tips to Beating the Odds in Forex to Make Profits

5 Tips to Beating the Odds in Forex to Make Profits

Forex Trading TipsForex is volatile over the counter, global currency market, with maximum liquidity and convenience of access. As a decentralized market, FX was initially meant for the bigger sharks like the big banks and institutions to play in. With digitization and the advent of the internet, FX market opened its doors to everyone albeit a condition that individual traders need to go through brokers to trade, especially, if a person wants to trade online.

However, Forex is not an easy market to trade in. A trader needs to beat many odds to come out with flying colors. However, there are a few tips that can help a trader double check his approach to FX trading. This, in turn, might help him or her break the train of failures. Keeping abreast of Forex market reviews in another way to be in touch with current trends and expert advice on FX trading.

Assuming that a new trader has his basic understanding of the Forex market in place, here are few good-to-practice to help him beat the odds in FX trading.

1) Get the strategy to trade:

As and when a trader starts trading, he will learn more about the market and the way it operates. One of the ways to improvise on a strategy is to adopt the price action strategy. A simple method, which has been used for a long time, price action strategy concentrates on speculating on the price movement in the market which would be repetitive.

The strong point of this strategy is that it remains constant overlooking any kind of changes or paradigm shift in the Forex market.

A trader might feel that modifications in the strategy might help them trade better and that is perfectly alright. An active trader is bound to develop his own unique perspective about the market, which will ultimately be his signature trading style. However, here is a word of caution. Like every new bloomer, a new trader is full of dreams and enthusiasm. In Forex trading whilst dreams can be the motivating factor, too much enthusiasm may prove fatal. Hence, it is of utmost importance to be level-headed and work with the strategy, patiently.

2) “Cut your cloth according to your length”:

These are the golden words when it comes to Forex trading. Forex specialist Kishore M emphasizes on the need for new traders to understand that a “win” in the Forex market should not send them into a confidence overdrive or a loss should not plunge them into a revengeful shock. Both of these traits are fatal. This should be kept in mind, especially by the manual traders.  The emotional overdrive, attached with human engagement is negated when a trader trades with automated systems.  The spiraling emotions often make traders over-trade and this leads to failures which translate to mean more losses.

A trader already has costs to bear while trading. The costs include a broker’s commission or his spreads. Additionally, a trader might also be burdened with the penalty fee for not maintaining the minimum amount in the a/c in case of a day pattern trader. Over and above these, making losses will be the death knell of an account.

3) Keep an emotional check:

The Psychological aspect of a trader is often overlooked by the traders themselves too. However, it is necessary for traders to be aware of the fact that trading emotions are real. When they feel them in the course of trading with every success and failure, these emotions need handling. For instance, a losing trades over a few weeks or multiple times during the day (for a day trader) demands that the trader stop trading for some time. Instead, spurred by hope to gain back what is lost and a fear of making more losses, often sends a trader back into the market, staking more money, hence making bigger losses due to wrong decisions. This can at times break a trader emotionally.

As an expert on FX who also trades, Kishore M has a few words to states on this aspect.  He says that it is therefore important for a trader to know when to stop trading, and when to keep playing or when he should probably take that long-standing vacation. There have been cases of seasoned traders, losing big, which have led to deaths.

4) Undo the misconception about lower time frames:

The general perception amongst new traders is that the narrower and lower the time frames, better the profit-making chances. This understanding stems from the fact that lower time frames generate more signals.

The equation of more signals in lower frames is directly proportionate to the fact that the Forex market is never stagnant. With trading going on 24X7, the market prices will keep on moving. Lower time frames will showcase all of these movements. However, processing the constant hammer of updates and monitoring the signals will not necessarily give the perfect hint at opportunities. The window to absorb and think is less in lower time frames which makes trading decisions tricky.

Instead, if a trader sets up longer time frames, he can watch the trading pattern build up over weeks or days or even in 24 hours. These time frames in FX also give traders, hints on reversals and hence makes the speculation of price movements much sharper.

5) Charts do not need constant monitoring:

Over a period of time, as traders become more acclaimed to the Forex market and environment, they understand that constant monitoring of the FX market leads to blunders in trading. This happens due to false hints. For instance: For traders from the technical school of thought, a major speculated price move and its resulting pull back, may seem like a hint towards an upcoming upswing. This, however, might turn around later in the day or maybe in the week. Having read the signal wrong for that moment, a trader might end up selling or buying earlier than needed.

Some of the other repercussions may be:

  • Not taking profits when it should be taken due to momentary false hopes;
  • Taking profits when a hold would have made more money, due to miscalculation of the market trend;
  • Misjudging the stop-loss orders; and
  • Taking up the wrong positions.

Conclusion:

Forex trading is risky yet it is as lucrative too. No one, who dabbles in the FX market may ever state that they have never faced failures. In fact, these failures have made winners out of the traders who learnt their lessons well. The tips shared here are some of the lessons learnt. It may prove useful if traders take away pointers from here to be adopted into their FX trading strategies to beat the odds in FX trading.

2018-11-26T11:12:37+00:00