Trading on the forex (fx) markets is far from easy. When mistakes are made, it can lead to losses. Once traders find themselves in a downward spiral, it can be very difficult to turn things around and improve their performance within the market. However, following a few simple steps could help maximise their chances of success.
Trade only what you can afford
The most important rule of trading on the forex market is only trade with money that you can afford. Trading with money you don’t have will inevitably see you making poor trading decisions, leading with your emotions rather than your head. However, if you do not have a huge amount of money to trade, the forex market can work well. Micro and mini accounts, where you are able to trade small sums, are available through many brokers. Taking the time to learn good money management will help you build up funds and increase trading confidence.
Choose a trading method and stick with it
Very often, traders enter the forex market hoping to earn a lot of money, very quickly. In reality, it simply doesn’t work like that and anyone hoping to achieve this is certain to fail very quickly. The only serious way to make money with foreign exchange is to establish and perfect a long-term method of operating. Under this system, gradual and continued success becomes possible. One example of an effective trading method is Price Action trading. This is an easy method to learn, requiring traders to read raw prices. There is a high probability that Price Action patterns repeat themselves and as such traders can often anticipate future movement. Once you have chosen a method that feels right alongside your trading style, stick with it. Only by committing to a method and then spending time perfecting it, can a trader begin to see positive results. Above all, do not move from method to method and expect to achieve any long-term success.
Use Higher Time Frames
Understandably many forex traders believe that the lower time frame, the more trading signals and therefore the higher the chance of making a trade and money. To a certain extent this is true, but it also means more opportunity for false signals and a higher risk of failure. Therefore, the best place for novice traders to learn how the markets work is the higher time frame charts. For example, using a daily chart, which has progressed through all trading sessions worldwide provides the trader with far more information than an hourly one. A 24-hour candle will tell a much more comprehensive story than an hourly one and false signals will be easier to spot.