Become a better Forex Trader with these Simple Rules

Forex trading is a relatively easy concept to grasp but incredibly hard to master and if you truly want to succeed in trading forex, you need to develop a plan.

Become a better Forex Trader with these Simple Rules

Forex trading

Online trading in the retail forex market is incredibly easy to get into and quite affordable as well. Forex trading is a relatively easy concept to grasp but incredibly hard to master and if you truly want to succeed in trading forex, you need to develop a plan. Your plan also needs to be tested thoroughly against multiple currency pairs in order to verify that your strategy works and give you an idea of which markets work better with your trading style and schedule. In order to keep things simple, we’ll go through 3 simple rules you can incorporate into your trading regimen to instantly become a better and more efficient trader.

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Trade the majors

It makes sense that the most popular currency pairs in forex trading are also the most liquid. Higher trading volume means more supply and demand and therefore faster trades, as well as better spreads. Low spreads are one of the highest priority conditions for short-term traders and since trade execution matters for all types of traders, the majors should be a staple and included in all trading strategies.

If you are looking for the best major currency pair to trade, you should consider the EUR/USD as it’s the most traded pair in the market. Also, the forex market technically works around the clock and during the time when both the New York and London sessions overlap, the trading volume is tremendous and quite favorable both in terms of spread and volatility. This overlap occurs every day between 13:00 and 16:00 GMT. Therefore, if you want to trade the EUR/USD or GBP/USD pairs, you should ensure that you have access to your trading platform during that time.

Of course, that doesn’t mean that opportunities can’t be found in the less traded pairs like the crosses and exotics. In truth, these pairs are so volatile that experienced traders can take advantage of these markets with great success. However, you should only trade these if you can stomach the added risk the increased volatility provides.

 

Stick to the plan

It goes without saying, that in order to achieve consistent results in forex trading, you need to have a plan, a clearly defined set of rules that you can look for and apply in every trade. This plan is what will hold you accountable to yourself and paint a better picture of how accurate and reliable your methodology of market analysis truly is.

The plan or your trading strategy can be as simple as requiring one condition, i.e. I will only trade if the price of this asset breaks out of a key support/resistance level. Trading this way will allow you to ignore the noise and hopefully stop you from opening poorly planned trades that are guaranteed to lead to losses eventually.

Quality over quantity is a big part of a solid trading strategy. Ideally, you should be aiming to minimize the amount of time you spend over the charts, however counterproductive that might sound. Develop a clear trading plan and stick to it.

 

Go easy on the leverage

How well you can preserve your capital is what can make or break your online trading journey as a forex trader. The common rule of thumb is not to overleverage your trades in order to not risk more than 1 or 3% of your total account size per trade. Since losses are an inevitable part of every trader’s day, week or month – your position size should account for this risk and calculate how much you can afford to lose in each trade accordingly.

Even a single bad trade with high leverage can wipe out a high percentage of your account and destroy months of hard work. If you get greedy, the market will eventually catch up to you. Therefore, money management and risk aversion should be a fundamental part of your trading plan.

The market is highly vulnerable to news and events and especially in the recent geopolitical climate where investors’ confidence is easily affected. Trade conservatively and never disregard stop loss orders as they can be your only failsafe that can protect you from a wild price swing when the market moves against you.

 

Conclusion

The best thing you can do to find success in forex trading is to find the patience to be consistent with your trading plan. Straying away from your rules will lead to emotional and greedy trades which aren’t a viable way of trading a market as unpredictable as forex.

Find the currency pairs that fit best with your trading style and trade only when the market meets your requirements and don’t wait for the market to dictate when you trade. As long as you can manage to stick to the rules you personally defined and stop overleveraging your trades, you will eventually be able to reach consistent results that are positive regardless of the market climate.

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