Winning Forex Trading
Even if you choose to position trade, swing trade, or just trade long-term time frames, it's crucial to pay attention to daily pivot points if you're a day trader. Why? simply because thousands of other traders pay attention to pivot levels. Pivot trading occasionally resembles a prophecy that comes true. This means that because many traders will place orders at those levels because they are confirmed pivot traders, markets will frequently find support or resistance, or make market turns, at pivot levels. Since many traders have made bets anticipating such a move, big trading moves that occur off pivot levels frequently have no true fundamental justification.
You should monitor daily pivot points for signs of either trend continuations or potential market reversals, regardless of your individual trading technique. Consider pivot points and the trading activity that takes place around them as a confirming technical indication that you may use in combination with whatever trading method you have chosen.
Trade with an edge
The most successful traders are those who only take a financial risk when a market opportunity offers them an advantage, something that raises the likelihood that the trade they make will be profitable. Your advantage could be as easy as purchasing at a price level that has previously demonstrated itself to be a level that offers large market support or selling at a price level that you have determined to be strong resistance. By having a multitude of technical elements work in your favor, you can boost your edge and likelihood of success. A market should experience significant support or resistance if, for instance, the 50 period and 200 period moving averages all converge at the same price level. This is because traders who base their trading decisions on any one of these moving averages will be acting in concert.
Converging technical indicators give traders a comparable advantage when several indications on different time frames combine to form support or resistance. One possible illustration of this is when the price reaches a support or resistance level and the price action at that level triggers a candlestick formation, such as a pin bar or doji, that suggests a possible market reversal.
Preserve your capital
Avoiding significant losses is more crucial in forex trading than experiencing significant gains. If you're new to the market, that might not sound entirely right to you, but it is true all the same. Forex trading success depends on your ability to protect your capital.
Trading's most crucial guideline is to play excellent defence. Why is playing excellent defence in forex trading—that is, protecting your trading capital—so crucial? Because of the simple fact that they run out of money and are unable to continue trading, the majority of people who try their hand at forex trading fail. Before they can enter what turns out to be a highly profitable trade, they blow up their account.
It is only somewhat exaggerated to claim that adhering to stringent risk management guidelines will almost certainly result in your success as a trader. A major winner will ultimately almost fall into your lap and enormously increase your profits and the size of your account if you can just manage to protect your trading capital by avoiding experiencing catastrophic losses, which will allow you to keep trading. Even if you are far from "the world's finest trader," luck of the draw will eventually cause you to make a deal that yields more than enough profit to turn your year, or potentially even your entire trading career, into a hugely successful one.
But in order to take advantage of that deal, you must have enough money in your account to make a profit anytime a similar trading chance presents itself. The most crucial strategy for profitable trading is limiting losses by refraining from excessive trading or taking on too much risk in a single deal, protecting your investment funds.
Simplify your technical analysis
Here are imagery of two very different forex traders for you to consider:
Trader #1 has a spacious, luxurious office, a top-of-the-line trading computer, multiple monitors and market news feeds, as well as a large number of charts, each of which is loaded with at least eight or nine technical indicators, including five or six moving averages, two or three momentum indicators, Fibonacci lines, etc.
A look at Trader #2's chart reveals that there are just one or two - possibly three at most - technical indicators overlaid on the price action of the market. He operates from a really plain and unassuming office space and only utilizes a regular laptop or notebook computer.
You probably guessed incorrectly if you thought Trader #1 was a really successful, professional FX trader. In actuality, the illustration of Trader #2's workspace is more representative of how a continuously successful forex trader actually does business.
There are essentially countless technical analysis methods that may be used to analyze a chart. But more isn't always — or even often — better. Usually, considering an almost infinite amount of indications just helps to make things more difficult for a trader, heightening uncertainty, doubt, and indecision, and preventing a trader from seeing the big picture.
A relatively simple trading approach—one with just a few trading principles and little indicator consideration—tends to be more efficient in generating profitable transactions. In fact, there are many that have precisely ZERO technical indicators – trend lines, moving averages, relative strength indicators, and most definitely no expert advisors (EAs) or trading robots – overlaid on their charts.
Place stop-loss orders at reasonable price levels
This axiom could appear to be merely one part of maintaining your trading capital in the event of a bad trade. Yes, it is that, but it is also a crucial component of successful forex trading. A common error made by new traders is to think that risk management merely entails placing stop-loss orders very near to the entrance point of a trade. It is true that practicing effective money management entails avoiding placing trades with stop-loss levels that are too far from your entry point and negatively impact the trade's risk/reward ratio (i.e., risking more in the event the trade loses than you reasonably stand to make if the trade proves to be a winner).Running stop orders habitually too close to your entry point, as demonstrated by having the trade stopped out for a loss, only to have the market turn back in your favor and having to endure watching price advance to a level that would have returned you a sizeable profit...if only you hadn't been stopped out for a loss, is one factor that frequently contributes to lack of trading success.
Yes, it's crucial to only place trades where a stop-loss order may be placed sufficiently near to the entry point to prevent suffering a severe loss. However, it's also crucial to set stop orders at a fair price level depending on your market analysis.
An often-repeated general rule of thumb for placing stop-loss orders is that they should be placed slightly above a price that, based on your market analysis, the market should not trade at.
The forex market has its own distinct qualities, just like any other type of financial environment. A trader needs to develop these traits over time, through practice, and through study in order to trade it profitably. Traders will do well to keep in mind the helpful tips to winning forex trading revealed in this guide:
Pay attention to pivot levels
Trade with an edge
Preserve your trading capital
Simplify your market analysis
Place stops at genuinely reasonable levels
Of course, there is more trading knowledge to learn about the forex market, but that is a very good place to start. You will have a clear trading advantage if you keep these fundamental guidelines for successful FOREX trading in mind.