Regularly checking out proven trading methods and techniques is important if you want to achieve consistent profitability in Forex trading.
Here are some suggestions that may help:
Learn to limit losses
The art of successful trading relies more on avoiding losses than on profits.
In any type of trading, your main goal should be to limit the drawdown and prevent losing trades from eroding capital significantly.
To limit losses, most traders prefer to use a predetermined exit plan.
A stop loss order can be used to prevent foolish decisions in a trade, while a "trailing stop" can be used to trail a position, allowing for larger profits while protecting the position from unexpected reversals.
Furthermore, not only must losses be limited, but all positions must be reviewed regularly to ensure that your total trading capital risk is kept to a practical minimum.
Know your limits before you open any positions!
Just as it is absolutely necessary to place a stop loss on every trade, it is also imperative to consider the "maximum loss allowed" when managing your total trading capital.
The rules are simple: never trade with more money than you can afford to lose, and always keep ample cash reserves. When assessing position sizing and cash needs, ensure that actively traded funds are not commingled with funds that are used for other purposes.
It is also important to set a "total loss limit" at the beginning of each month. When this level is reached, trading should be suspended during this period.
Of course, if your losses are consistently higher than your profits, stop trading! rest for few days.
When you're ready to try again, evaluate your current trading strategy, review recent trades (learn from your mistakes), and move on. When you start to make a profit, deposit a portion of your profits in a reserve account in case there are surprises in the future.
Know your strategy and only use techniques that suit your trading style
You can't make good decisions without understanding the mechanics of a particular technology. In fact, the best traders are acutely aware of the shortcomings of a particular approach.
Focus on positions whose trading characteristics match your capabilities and risk-reward attitude. Don't use complex or advanced methods just because they are complex and advanced and you want to feel like Einstein.
If a strategy doesn't suit your financial situation, no matter how attractive it may seem, it should be avoided. Obviously, every strategy has risks.
The key is to develop a profitable method. Only use methods that match the market outlook and maximize the potential of each transaction.
Learn the Art of Patience
Creating deals is especially important and deserves your best analysis and judgment, and it is important to evaluate all potential deals in advance. Proper timing of initial entry requires a thorough understanding of charting techniques and market trends.
It is imperative that a trader fully understands the entire process, as a successful exit is basically the result of a proper entry. Traders who overtrade should evaluate the consequences of their past careless behavior whenever they are tempted to overtrade.
Be steadfast in following the plan!
Success will come when you strike a good balance between doing your homework, good judgment, and patience. Too many traders give up after a few bad trades, before they have had time to learn and absorb the various methods required for profitable trading.
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