In any profession, there are certain boundaries, which are meant to be crossed for a person to become a professional. It means they understand and know their work 100%. Trading is also a profession and not simply a game, as it is presented by mass media. However, in order to earn money, a trader needs to master their skills.
It is particularly true for the foreign exchange (forex) traders. The market specifics make even experienced traders afraid to trade here. On Forex, there is a rather huge risk to get blown on a ‘stop.’
We will not give subjective trading advice but will tell you about regular actions that will increase your expertise and deposit.
To trade Forex, make it a rule to manage risks. There is an effective money management method for trading Forex with minimum loss and maximum profit. It is a method of fixed risk.
It has been known for a long time. However, only professionals use it regularly. In other markets, the risk per transaction usually does not exceed 2%. On Forex, it is better to risk less than 1%.
Three reasons for the exclusive efficiency of this method:
Every loss is a certain share of a deposit, just like every profit. That is why uncontrolled risk can drain the entire deposit in the long run.
Markets change, or rather, their volatility fluctuates. Price movements can either be strong and adhere to a trend or go through frequent corrections, but still stay in the trend.
On the forex market, movements are often in a certain range, and volatility in these ranges constantly changes: weak movements from the borders or strong broad movements — this is what forex traders have to deal with. Usually, in such cases, they call such a market ‘flat.’
To test a trading strategy in such a market, it is not necessary to create your own adviser. Opening Excel and quote history in the terminal is enough. And then the painstaking work begins: you need to write down each transaction in the table, note the drawdown, stop, profit, direction… All the conditions that will help understand where the strategy brings a loss and how to fix it.
Often, it is enough to increase or decrease the stop, so that the trading strategy becomes profitable. Of course, such testing of all currency pairs is a laborious task. To start with, one or two pairs are enough to test the efficiency of the strategy.
Good and long-term trends are rare in the forex market. If they appear, it can be difficult to notice them due to constant corrections or pullbacks. However, this does not mean that it is impossible to catch such a trend. The main thing is not to put the stop too close to the price. As a target, you can use the Parabolic SAR, Moving Average, and Bollinger Bands indicators.
One more thing: it is necessary to catch trends with a positive swap. Each currency pair has negative and positive swaps. They depend on the base currency of the account and the direction of trade — long or short. For example, when trading long and deciding to leave the order for several days, the trader receives an additional profit every night. This principle is also the basis of the popular strategy ‘carry trade.’
Do not put on a back burner. Seize every opportunity when it comes to forex trading. Keep your hands in the valuable skills you acquired.
Practise every day. It is unlikely you will learn all forex details and strategies in a year, let alone a month. That is why you need to practise every day even with an empty deposit (open a demo account and go on).
Constantly enrich your knowledge. There are many sources: trading manuals, online courses, websites about Forex with questions and answers. You can join the forex trading club of Julie Sommaruga. Its experienced members will help you.
We hope that these methods will help you improve your trading strategies and grow closer to a dream of making money on Forex professionally. Remember: a professional trader is always a successful trader. To become one, you need to take trading seriously.