The world of forex trading is often shrouded in mystery. The reasons for this are numerous but boil down to the fact that there are multiple trading strategies that can be successful. In other words, there isn’t just one single strategy that works. This makes selecting an individual strategy both important and difficult.
The key to successful forex trading is maintaining a positive attitude. You must be able to combine solid analysis with effective implementation. Doing this will help you refine your skills. Keep it in mind that great traders are born out of hard work, experience, and talent.
Below are three key forex trading strategies that all beginners should take note of. Implement these into your overall trading and you’ll master the market that much faster. For even more information on mastering forex trading strategies, download the Forex Trading eBook for Beginners for free.
Table of Contents
The proper approach to forex trading is essential if you hope for success. You must properly prepare before you start trading.
Step one involves setting your personal goals. Design these goals based around your temperament and personality. Align both of these factors with the instruments and markets you can relate to. In other words, trade in those markets that you have the most experience and knowledge with.
But a good approach to forex trading goes beyond that. It also consists of time frame, methodology, and market. We look at each of these components in more detail below.
Select the time frame to trade on based on your temperament. Select weekly charts if you’re comfortable with overnight risk. You must also be willing to see some negative days pass during the week. If this doesn’t sit well with your temperament, you’re probably better off trading on the five-minute charts.
The time frame you select also relates to the amount of work you’re willing to put in. Do you want to sit in front of the computer screen all day every day? Or would you rather only spend time trading on the weekends?
Your chances of forex trading success are much higher if you stick to a specific methodology instead of switching things up often. For example, some people prefer to buy and sell resistance while others prefer to do the same with breakouts. Another option is using indicators including MACD and crossovers.
Before dedicating yourself to your methodology, you should first test it to makes sure it works on a consistent basis. If it doesn’t consistently provide you with a trading edge, you should start to think about another plan. You must select a system that’s reliable at least 51% of the time.
Every market requires a different trading strategy. That’s why it’s important to test your particular methodology with the market you’re interested in. Check to make sure that the two match up well and that your system is effective with your market.
As we mentioned above, attitude is essential to successfully trading forex. You must develop the right mindset. A good forex trading mindset consists of the following factors.
Forex trading is all about patience. You must wait until the time is right to make a trade. You shouldn’t enter or exit a trade until these numbers are met. Along these same lines, it’s important to understand that there will always be another trade. There is no reason to invest in a trade that doesn’t meet your numbers.
Similar to patience, discipline is important in waiting for a trade. It means that you have the ability to stick with your system even when times are tough. With discipline you’ll believe in your system even through the hard times. And when better times do come around, your system will shine once again.
You must be able to look at your trades and your strategy objectively. Indeed, objective in this context means emotional detachment. You shouldn’t let yourself make trades based on emotion. They should always be based on fact, experience, and logic.
You won’t be successful at forex trading if you have unrealistic expectations. In other words, you can’t expect to make big money on every trade. You have to understand that you’ll win some and lose some along the way.
No matter how much experience you have, you will never have a system that guarantees 100% success. That’s just not possible. Even if you’re profitable overall, you’ll experience some losing trades.
Indeed, even the best systems have a profit rate of about 65%. The losing trade side of the ratio sits right around 35%. What this means is that proper implementation of your strategy is the key to a positive profit to loss ratio.
Solid risk control is at the heart of all successful trading strategies. Don’t put all your eggs in the same basket. Attempt to get your trade started in the right direction. If it’s not successful, then try again. But don’t try too many times on a similar trade if it isn’t working. This strategy requires the patience and discipline discussed above.
Proper implementation relies upon picking the right market to trade in. You can find the one that works best with your system by testing out a few different currencies, stocks, or commodities. It’s easy to see which ones are working and which aren’t by charting all of the trades you attempt.
Forex Trading Success
As a beginner, forex trading is often confusing and complex. It’s important to realize, right off the bat, that it’s actually neither. Forex trading is actually very straightforward once you know what you’re doing.
So experiment with different trading methods until you find a successful strategy. Use the strategy that guarantees long-term success. Small losses are okay but you should avoid big losses like the plague. For a more in-depth look at forex trading and effective forex trading strategies, download the free Elite Forex Trading eBook for Beginners.