No one begins trading forex as a professional. To become a pro at selecting trades and understanding the timing of entering and exiting profitably, the experience is required.
It doesn’t happen overnight, but if you follow the basic rules, you will build a safety net around you as you learn and grow in the world of forex. While there are a lot of steps you should take to become an advanced trader, there are also mistakes that can be avoided.
Here are a few of those moves that will help you become a seasoned trader.
#1 The Importance of a Trading Plan
Beginning to trade without a carefully laid out plan can cost you big time. In fact, you cannot succeed in the long run without putting some time into planning your trades.
Before you can even think of planning your moves, you’ll need to spend a chunk of time researching and learning. Once you have learned how the foreign currency market works you can set up a formula to use when placing trades.
The important tip about working with a trading plan is that you never change the plan in the middle of a trade, and this is what beginning traders forget.
Becoming overwhelmed with emotions or second-guessing a trade should not lead to deviating from your plan. Remember that you put a lot of learning and thought into this plan, and for good reason. If you’re confident that your plan is correct, then stick with it!
#2 Studying Your Trading Journal
It’s important to learn both from your trading gains and your losses by recording every move you make in a trading journal.
Don’t skip a beat when it comes to writing all your moves down because this is your number one learning tool as a beginner. As an advanced trader, it’s your trading journal that will keep you on the right track.
When you go over it and evaluate your trades, you will be able to identify trends that you can then apply to your trading plan.
You should be very frugal with altering your plan, but once you notice an error in the wrong direction, go ahead and tweak it. Bump it up or down slightly and then continue. If your trades are more profitable that’s great, but if not than you can always bump it again.
Your trading plan and your daily journal should become best friends, as one relies on the other.
#3 Placing Stop-Loss Orders
Beginning traders often make the mistake of not implementing stop-loss orders. They can lose substantially before realizing how important it is to put a stop-loss on each trade.
By placing a tight stop-loss order at the time of the trade, sizable losses can be minimized. Along the same vein, beginners sometimes become over-confident with all of their new knowledge and over-trade.
Both of these mistakes can lead to losses that are high enough to kick you out of the trading game early on. Remember to learn, document and protect your trades.
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