Now we are into Feb 2020 What better way to start with some Forex Trading Tips!
I hear new year, new me and the milestone of another year makes for some motivation to implement some changes.
February also marks for an important month for those that carry on with their new found disciplines or those that regress to their old habits.
When it comes to trading, evolution is paramount.
A continued self-reflection of improvement is required.
If you are reading this, I guess you will be fairly new to Forex trading or struggling to trade consistently.
This article is aimed at you.
Below are some tips for trading the financial markets and Forex trading in 2020
Before you get stuck in come and say hello on social media!
Forex Trading Tip No1.
Be completely honest about your trading mistakes and weaknesses and look at your past behaviour for the solution.
If you Look inward and be completely honest about your mistakes you will improve.
Yes, I know what you are thinking, what has this got to with Forex trading!?
As a full time, trader, myself let me enlighten you somewhat.
For a couple of years, I was a break-even trader for a period over 2 years (before that I was blowing up small accounts for a few years).
Do you know I found being a break-even trader more frustrating than a losing one!
At least with losing I could stop what I was doing to lose, simple.
So, the simplicity of making progress was to stop being lazy and look at what I was doing wrong. Own up to my mistakes and look at my actions and be honest with myself.
I was being emotive, impulsive and was over trading!
Okay the next steps for me was to address the issues and see what happens.
I made quick progress and soon was a break-even trader! Great I thought as the losses subsided but then it dawned on me after around 6 months the account was flat!
Okay, I’m making some progress but let’s carry on and see what happens.
Stupidly, I didn’t look sooner as I carried on as a break-even trader for another 18 months, lazy!
Time to reflect again I thought.
The best thing I have ever done.
It was clear I was still over-trading!
This was addressed and guess what…
I have been consistently profitable since that intervention.
You can see that looking at my own mistakes and addressing them made way for growth and improvement.
You can always ask for help in identifying these issues too, do not let your pride get in the way.
But don’t ignore them.
What ever you do don’t forget about them and then look for the next holy grail system thinking this will be a solution.
It won’t be because every issue and solution starts and finishes with yourself.
Forex Trading Tip No2.
Understand how price behaves.
Each market is different and will behave differently.
EUR/USD with behave differently to USD/JPY for example.
Generally, price does behave in a similar fashion over time on the higher time frames.
Ranges, trends and structural changes of significance will need to be observed and understood to be a successful trader.
Watch some of our videos on YouTube.
Once you gain an understand of how the market behaves you obtain confidence in forecasting.
You place the probability on your side and therefore can capitalise on the price move, subject to the rest of your strategy allowing you.
If you are a new Forex trader this may seem overwhelming.
Do not worry we were in your position once too and we didn’t have us to help!
Forex Trading Tip No3.
Use Indicators to Help you Map the Market
Indicators in Forex trading have a purpose.
99% of traders use them for good reason.
Hedge funds, investment banks and prop traders all use them even if it isn’t widely reported.
Bloomberg and Reuters use them while reporting on the markets on TV
Why would you not use them and place yourself at a disadvantage?
I use them in a way that they visually aid me in assessing the market structure.
They aid me in observing if the market is bullish, bearish of neutral.
This is dependent on position of price relative to the different indicators.
Some of my favourites are moving averages, envelopes and oscillators such as MACD and RSI
Technical analysis plays a big role in understanding price forecast on a probability basis.
That is all trading is a game of probabilities.
It doesn’t matter what data you are analysing it all comes down to probabilistic outcome.
How you get there really doesn’t matter if it proves to make you money consistently.
There is a view by some fundamental and macro traders that discount Technical analysis.
Whereas I keep an eye on the bigger data points and technical analysis.
Discounting one over the other is arrogant and silly in my opinion.
Forex Trading Tip No4.
Do Not Ignore the Importance of Risk Management
You have probably heard the phrase risk management.
What exactly does it mean?
Managing risk is the most important aspect of trading.
Without managing your risk, you simply could lose all your money and then you can’t trade!
So, with in mind it should be at the forefront of your mind when it comes to Forex trading.
Risk management is a multitude of disciplines.
- Position sizing
- Stop loss placement
- The discipline not to move your stop loss
- Take Profit placement
- Plan and having a framework (A methodical approach before pulling the trigger)
A lot of traders ignore this and that coupled with a poor attitude to self-reflection often ends up in the 90% statistic of those that never make it.
Forex Trading Tip No5.
Forget Day Trading (for now) if you are a beginner
If you are a newer trader day trading is like a magnet.
Brokers push it because they want your money!
It’s perceived to be glossy, exciting and everyone on social media is an expert day trader!
Boasting colourful images with materialistic faux success such as sitting on a yacht or in a rented Lamborghini.
The promises of easy wealth all while day trading by the beach or in a Jacuzzi with a laptop.
However, many new Forex traders fall for it.
The reason is the slick marketing.
The naïve really believe they can walk into one of the hardest industries in the world and start making instant gains?
Not only that instant riches!
Where has the rational thinking gone?
Day trading is very hard and is for the very experienced.
Once you obtain experience on the higher time frames you can look to day trade.
First, I would demonstrate to yourself you can be consistently profitable.
This would be for a sustained period of no less than 12 months, then perhaps look at day trading.
You may have heard the saying that trading is a marathon and not a sprint.
This is very true. Quick riches are very likely not going to happen to you unless you gamble with the markets.
If you adopt that attitude the house will win… eventually.
Refrain from being sucked into this world of easy money and unrealistic returns.
If you find yourself already in it you should stop immediately and reflect on your situation and address it.
This will be the easiest and quickest way to get on track to obtain the correct education.
Forex Trading Tip
No6. Multi Time Frame Analysis
Why do traders have multiple monitors?
Some to show off others use them wisely.
I happen to have 3 monitors.
This aids my efficiency when undertaking multiple time frame analysis.
I have one showing data metrics and different markets with the 4-hour time frame chart with my chosen asset.
Usually a currency pair.
The next monitor will be of the daily time frame with the same currency pair.
The last monitor will show the weekly time frame, again with the same currency pair.
I toggle between weekly, monthly and quarterly time frames on this monitor.
Much like indicators, multi time frame analysis is an essential part of the process.
To discount it you are placing yourself at a disadvantage.
That is why day trading is so difficult, because the newer traders tend to be zoomed in on a 15min chart and are not looking at the bigger picture.
What appears to be happening to the specific market on a 1 hour or lower will be totally different on the 4-hour, daily and weekly time frames.
Once you get your eye in on the charts and start looking at multi time frame analysis the picture becomes clearer.
With time it becomes easier to analyse.
I started with just a lap top flicking between time frames.
Or I split the single screen.
There are many options to help you.
Connecting to a TV via HDMI cable or another monitor.
The truth is you should try as best as you can to look at the markets in a multi time frame approach.
I wouldn’t be sharing these tips if I knew they were not hugely important.
They all contributed towards my success as a consistently profitable trader.
Forex Trading Tip No7.
Accept Losing is as Much a Part of a Winning Strategy
Now, you would have thought it?
Losing to win. This may come a surprise, Am I right?
This reality seems to scramble a lot of brains to the point some new traders simply do not want to believe it.
Losing knocks the confidence and is really quite a confusing concept.
Let me give you a simple analogy.
A football team can go through the season and concede goals and lose matches.
However, they can still win the league!
Taking small managed losses is the key.
They are unavoidable.
This is where risk management and discipline are key factors in your approach.
It should be understood that the losses are aligned with a good strategy that has been back-tested.
This is coupled with a win/loss ratio that has being confirmed.
Managing the losses will then get easier.
I know from over 10 years of trading.
How did I become so comfortable with losing trades?
Understanding my strategy, that helps hugely.
Risking no more than 1% of my entire account on any one trade.
To add, I will only have a maximum number of trades open.
This limits my overall exposure to the market and sudden price changes.
Hedging techniques also lowers your account exposure when undertaken correctly.
This is a more advanced methodology in reducing your risk.
In the risk management Forex Trading Tip 7 I mentioned that you should preserve capital.
This is essential or you cannot trade until you have more money!
The incorrect mindset is what tends to throw people off.
The usual path for a new trader is to attempt to learn a new strategy.
When they encounter losses, they begin a doubtful process which spirals into a real doubt that the strategy works.
Fear sets in and they cannot trade objectively.
They then jump onto the next going strategy known as ‘system hopping’
The issue is not understanding how the strategy behaves in the first place.
Or it may be the case that the strategy simply does not work!
You must be careful and do you due diligence.
If you have ever had an education in trading and you are being taught a strategy it should of been back tested.
This has many benefits.
You get to see how over a specific time horizon on the chart how the market played out.
You obtain that all important experience of seeing the trades.
The result will give you a ratio of winning trades to losers.
This is the important part.
You will then be able to determined given the conditions you have tested what the losers are in relation to the winners.
This may be 65% winners 35% losers.
If you would have tested 5 Forex Pairs over 5 years to obtain this data, you wold have a good understanding of how your strategy should perform over the long term.
This includes your losses.
Now you understand that there are some losses in your strategy you begin to realise that when those losing trades come along you shouldn’t be too worried.
The reason is you know and trust the strategy data results.
With managed losses this becomes a normal feature in your trading performance.
Here at Able Trading we have a Forex Trading Strategy and frame work that has been back tested.
Not only by me but by students.
We are aware of how it works and how is performs.
This aids your confidence hugely!
It means that when you get a loss you don’t become fearful.
You take the next trade when the conditions materialise objectively.
This remains the cycle, rince and repeat.
Forming good habits instead of bad.
You will still make mistakes.
See Forex Trading Tip No1 for the solution.
In this list I have listed what I consider to be the most important points of obtaining trading success.
These are all still relevant to me today.
I still utilise all these methods to remain consistently profitable.
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We supply you with the same education we apply to the markets week in week out to this very day.