When it comes to Forex trading, there are some things that you need to know if you want to be successful. There are the usual things you need to know, such as what tool to use, how to read charts and what assets are the best to trade on.
These are all aspects that your broker will help you out with. What about the things you need to know that your broker’s won’t tell you?
Here are 3 little-know Forex trading secrets that brokers don’t tell you about.
Forex trading secret #1 – Know Yourself
One of the most important lessons I learned was to know what my personal trading style was. It took me a while to figure that out.
Was I a short term trader? Buying at 25 selling at 26, buying at 30 selling at 31, and executing hundreds of traders per day each with a very small profit or loss? Or was I a medium term trader? Someone who would buy at 1.1400 and sell at 1.1600, sell 1.1500 and buy back at 1.1200, and executing trades much less often but realizing much bigger gains or losses on each trade?
Perhaps I was a long term trader? Someone who would buy in January and sell in June? Some might say this is more of an investor rather than a trader.
A lot of retail traders don’t know who they are and what their style and tolerance should be.
Forex trading secret #2 – Be Discipline
I’m sure you’ve read this in every trading book you’ve ever picked up. My definition of discipline is to determine your exit strategy before you enter the trade. As soon as you put a position on you should also enter your stop loss and stop profit orders. If you do that you will not be tempted to second guess yourself.
I’ve seen too many traders enter a position, watch it move in their favor to their profit objective but never close the trade. The un-discipline will say ‘this can go further; I don’t want to take my profit now’. Once the trade does reverse they will be reluctant to close the trade until it goes back to the highs- that’s when profits turn into losses.
The old saying on the trading desk is, ‘your first loss is your best loss’. Yes, sometimes waiting is the prudent decision but if you’ve done your homework and determine an exit strategy for both profits and losses you will be better off in the long run.
Forex trading Secret #3 – Don’t Get Too High, Don’t Get Too Low:
I’ve seen many traders over the years convince themselves that they were the best traders on the planet on a good day, one to then turn around and say that they are the worst trader there ever way on a bad day. You have to understand that there will be good days and there will be bad days and individual days do not determine your abilities as a trader.
The best hitters in Major League Baseball fail 70% of the time. The idea is not to be right; the idea is to make money. The trap that many people fall into is that they increase trading size and risk tolerance when they are on a hot streak, which would be fine as long as they decrease the risk tolerance once the hot streak ends; a lot of traders don’t.
If you want to enjoy a long and profitable relationship with the markets, be sure to include the 3 simple Forex trading secrets above.