There are 3 things that a successful professional trader does that new traders often forget:
- Plan a trading strategy
- Follow the markets
- Record, track, and analyses all of their trades.
Plan how you trade and trade how you plan!
You may have heard the adage, “if you fail to plan, you plan to fail.” This is true for any form of trading/investing. Experience shows that successful traders begin with a sound strategy and stick to it at all times.
Too many choices!
Many currency pairs are volatile and move a lot intra-day. Some currency pairs tend to be quite steady and make slower moves over longer periods of time. Research what pairs best suit your trading strategy – remember a “tranquil” pair can quickly turn into a volatile beast! Based on your risk parameters, decide which currency pairs are best suited to your trading strategy.
Seconds, Minutes, Hours, Days………
Based on your chosen currency pair, plan on how long you want to hold your positions: seconds, minutes, hours, days or longer. Remember, that depending on your account type, having open positions at 10pm GMT may incur swap charges.
Before you decide to enter a position you should formulate your exit strategy. If the position is a winner, at what price will you close and realize your profit? If the position is a loser, at what price will you close and cut your losses? Once you have made these important decisions place your stops and limits accordingly. I know many of you will decry the use of limits and stops but, although it is important to be watching the markets constantly, you may not be fast enough to enter and exit. Placing Limits and Stops ensures you stick to your strategy. It is always easy to take profits early and run losses longer – it is human nature! Placing orders ensures you “distance” yourself and helps avoid greed and panic (knee jerk) trading.
Follow the Market
All Brokers, and the various trading platforms they utilize, will have charting software and market analysis to help you monitor market information and the technical levels that will affect your positions. Charts are an indispensable tool to help your profitability. You do not need to spend money on sophisticated charting software unless you are Warren Buffett. Whether your Broker has MT4, MT5, cTrader or a Proprietary Platform you will have tons of studies/overlays to help you. Start with the basics: RSI (relative Strength Index), SMA (Simple Moving Average) and Pivot Points (Support & Resistance). As your knowledge/experience improves start looking at other indicators such as Bollinger, Fibonacci and Ichi Moku. The majority of the time you will find that technical analysis will confirm your strategy – if they do not then rethink how you are entering and exiting. No one is perfect – trial and error are needed to become a successful trader. Learn from both your successes and failures!Your Broker will often offer some form of Market Analysis. This can be in the form of a daily Newsletter, Blog and/or Forums. The larger Brokers will also provide breaking currency news via RSS feeds and in-depth analysis from their own In-House Economist, where it’s going, and why it’s going there. You may have access to third party providers through your Broker that offer live market commentary (akin to being on a trading floor) or bespoke fundamental analysis based on statistical data. Again, the bigger the Broker the more tools they will offer their clients.
Many traders fail because they make the same mistakes day and day out. Keeping an “old fashioned” diary can help by keeping track of what works for you and what doesn’t. If you don’t want to keep a “little black book” use post it notes or word on your PC. This works particularly well as an electronic version is easier to search! If used consistently, a well-kept diary will become a major asset to you. In order to be of value to you now and in the future it is worthwhile that it contains:
- The date and time you took the position.
- The currency pair you traded
- A note of the price in the other major pairs when you entered the position
- The rate you entered the position.
- The reason you took the position.
- Your strategy for the position.
- The date and time you exited the position.
- The rate at which you exited the position.
- A note of the price in the other major pairs when you exited the position
- Your profit/loss on the position.
- Why you exited the position. Did you adhere to your strategy?
With time, and patience, you will learn to recognize your successful trading patterns and you will be able to spot them when they return. More importantly you will, instinctively, trade with more patience with a clearly defined goal.
#tradesafely #fxzoo #doublehit