Three Top Tips for Forex Traders
The game of forex is more skill than luck, so to be successful you need the very best strategy. It is not fate that will decide whether you win or lose, but correctly interpreted numbers, charts and ratios, and a well-honed ability to interpret what’s happening in the world and how it will affect your trades. As you might expect then, the most talented traders tend to turn the greatest profits.
Here are a few of their top tips to help you follow in their footsteps:
Tip One: Choose a Broker that Suits Your Trading Style
The broker you choose will have a massive impact on your profits, because it’s their platform that’s going to give you access to the information you require. The best brokers, like Oanda, try to make sure that their clients have all the tools they need to be successful, but with so many different trading styles, different brokers will suit you to different degrees. This means that although it’s important to choose a broker who comes highly recommended, it’s even more important that their offerings complement you. Take the time to research what’s on offer, as opposed to just choosing the most popular or prevalent broker. If they offer demo facilities, take advantage of these, making sure that the platform you’re viewing will give you the opportunity to carry out all of the analysis you need. Don’t commit to anything until you find one that’s a truly perfect fit; after all, forex is a risky game already, so you need to do everything in your power to maximise your chances of coming out on top.
Tip Two: Do Your Calculations
Once you begin trading, constant analysis will be vital to assessing and refining your forex strategy. The best way to determine the reliability and success of your system is by calculating expectancy. To do so, you need to review all of your trades, measuring your profits against your losses: how often do you win or lose; and how great are your gains compared to your losses?
You can calculate expectancy even before you place any trades. All that you have to do is to look at your charts and assess where your system would have suggested you enter and exit a trade. Would you have made a profit or a loss?
To find your statistic, use this formula:
[1 + (average winning trade/average losing trade)] x percentage win ration – 1
If this figure is less than you’d like, then you know it’s time to work on your strategy.
Tip Three: Keep a Record of Your Trades
The best way to improve your strategy is to see where you went wrong in the first place, and one of the best ways to analyse this is by keeping a printed record. It’s a good idea to format a chart, listing your reasons for the trade, with a particular focus on the fundamentals that swayed your decision. Make sure that you also mark on your entry and exit points. You can use this to make an objective analysis of your trading decisions after the event, when there is no pressure on you, as well as to identify the strategies that were successful and the places that you went wrong.
Follow our top tips today to set yourself on the path to forex success.