Forex trading is not without risk. Those who are successful at it are very good at managing the risk whereas those who lose lots of money on the Forex markets take risky decisions and let their heart rule their head. The Forex markets are closely tied to the world economy and are therefore volatile at times. For this reason it is essential that you do your homework and manage risk as much as possible. Anything less is more akin to gambling, which is not the best way to make a consistent profit on the Forex markets. So how can you increase your odds when trading on the Forex markets?
There are two types of Forex traders: professionals and amateurs. Pro traders are usually more successful than amateurs, but it is not always down to the state of the market at the time of trading. Two traders might be using the same strategy, but only one of them will achieve success, so clearly there are other factors at work.
Trade with Logic not Emotion
Always plan your exit strategy. Work out in advance of making a trade how much you can afford to lose and then stick to that, no matter what else happens. Don’t be swept up on a tide of emotion when things appear to be working well – if you have reached your trading limit for the day, now is the time to quit while you are ahead. Trading with your brain not your heart will significantly increase the odds of winning.
Don’t Let Ego Rule
Winning streaks are seductive. It is easy to sit at your desk thinking you have finally cracked it. Your trading method works! You are going to make a fortune! Unfortunately this type of attitude will see your trading account take a huge hit. Ego is the antithesis of successful Forex trading. Egotistical traders who think they are God tend to do well in films, but never in real life. Instead, sit back take time out after a winning trade and never take your win for granted.
Keep it Simple
Don’t overcomplicate Forex trading. There is a lot of trading information and strategy reviews to consider. So much so that amateur Forex traders often get bogged down with analysis and forget to look at the simple price action based trading strategies first. Of course there are numerous events that affect the Forex markets, but in most cases the market will already have discounted the price.
Instead of worrying about obscure market factors, look at long-term trends, current patterns and looking for the sweet spot to buy or sell. These factors above all others will increase your odds of making money on the Forex markets.
There are lots of ways to improve your odds of success on the Forex markets, but the one all the experienced traders recommend is to wait for the easy trades and learn to listen to your instincts. You might not always get it right, but at least you won’t be getting it wrong as often.