Forex trading can be an incredibly rewarding hobby or even a full time profession if you take it seriously enough. This isn’t easy though, lots of traders struggle when they are just starting out and some may even give up entirely. In this quick piece, we will go through some easy, but extremely important, steps you can take to choose improve your trading with the best forex brokers.
Proper risk management is key to successful forex trading
Proper risk management is probably the most important thing when it comes to trading forex, even the best forex traders experience losing streaks and months of drawdown. What separates the winners from the losers here is how big their losses are. If you are risking 10% per trade and you lose 5 trades in a row, you just wiped out half your balance. On the other hand if you were only risking 2%, you would only be down 10%. Psychologically, a 10% drawdown is much easier to come back from than a 50% drawdown.
There are no hard and fast rules when it comes to risk management and everyone’s personal risk tolerance is unique, in general though, you should not be risking more than 2% on any one trade. Work out what level of risk is right for you and stick to it. After a couple of months, you may find you are doing well and and can begin to risk a little more than you were previously.
Don’t “freestyle” your forex trading
Developing a trading plan often leads to huge performance increases and you will also be more relaxed when going up against the markets. What you put in your trading plan and how extensive it is is entirely up to you, but some of the common things include what markets you are going to trade, when you are going to trade them, your risk management policy (risk per trade and max simultaneous trades), how often you will trade, what timeframes you will trade and which signals you will or won’t take.
Even if your style is more discretionary than systematic, there should still be lots of stuff to put in your trading plan. For example, you will definitely have your max risk per trade there and probably what markets and timeframes you are going to trade.
Maintain a forex trading journal
Recording your trades can be an incredibly enlightening process which grants you priceless insights into where you need to improve. How detailed your forex trading journal is and what you include in it is up to you, though it is a good idea to keep your journal relatively simple so it is easy to stay up to date. At a minimum you should include the date the trade was made, your reason for entering the trade, the amount you risked, what the result of the trade was and how this occurred (Stopped out? Take profit? Trailed out? Manual close?). Entry and exit reasoning is extremely important, once you have a solid sample base of at least 20 trades, you might start to notice patterns concerning which signals lead to profitable trades and which don’t, you might also notice you are exiting the majority of your trades too early or too late.
Keeping a forex trading journal and analyzing your trade process helps you remain objective when trading and can lead to substantial performance increases
Manage your risk, trade your plan and track your progress
We hope you have enjoyed this short piece on simple steps you can take to improve your forex trading, give them a go and we think you’ll be pleasantly surprised with the results!
Source: Vantage FX Blog