In this article we will discuss the timeless and unavoidable principles essential to a successful career in forex trading (or any other financial market for that matter). It may sound trite, but many less experienced players in the financial markets talk about these principles at their own peril, if they are even aware of them. We will try to discuss them in detail.
Number one is money management. You I can’t Violate this law: You must have some way of strictly controlling the amount you risk on each trade. The market is a lucky scene; a good trading system simply allows you to tilt the odds in your favor so that you win more often than you lose and hopefully (depending on your Risk:Reward ratio) have bigger wins and smaller losses so your capital grows with time. Anyone who is still disappointed to discover a perfect, loss-free system probably hasn’t been trading long enough and is still looking for a quick way to get rid of their hard-earned money. You need to know how to manage your capital through the mediocre and bad trades so that when the really juicy trades come along, you can maximize them. With sound money management principles, even a second-rate trading system would grow an account over time; but with poor money management, you could quickly ruin your trading account, even with a good trading system.
If you really think about it, there are only two things you can control in the markets: your risk and the quality of your trade setups. Once the trade is underway, everything else is pretty much determined by the market. In fact, even the best trading setups don’t always lead to the best results over time. Therefore, it is really important to have a good understanding of risk control when trading.
Number two is discipline. This involves sticking to your system rules and trading plan through thick and thin. A successful forex trading plan must take into account all possible eventualities and twists of the fluid market, and detail the appropriate steps you would take in each case. It is best to write such plans down and reread them frequently until they are firmly in the mind and can be followed. The ideal action when a particular market scenario arises and you take the steps required in your business plan, is No to reverse those steps no matter what happens next. A good price action based system would discourage sitting in front of the computer for an extended period of time, setting up and executing as many set-and-forget trades as possible that would profitably take care of themselves in the trader’s absence.
Most traders believe that they have to sit at their PCs for hours on end, taking care of their trades, looking for profitable opportunities, and exiting at the first sign of a price reversal. However, these steps could lead to self-doubt and destructive habits that will ensure that your profits are back on the market as soon as you get them. Conversely, once a profitable price action trade setup is identified on a chart, all you need to do is calculate your risk, place your trade with the appropriate Stop Loss/Take Profit values and walk away, letting your operation takes over. of himself. Such trades, if executed well, will in most cases prove profitable. Learning to trade with such methodologies not only builds your self-confidence over time, it prevents you from doubting yourself and trying in vain to fight a market that is much bigger than you and beyond your control or control. individual influence.
The third pillar is a good trading method. Keep in mind that while it is also important, it is only a minor component (about 20%) of a successful negotiation. therefore, it is necessary to have a simple and robust system with easy rules that can be easily interpreted in any trading situation in the minimum time and executed quickly to take advantage of possible market movements. A myriad of trading systems are traded on the Internet almost daily. When selecting an ideal system, one important factor should be considered: it should be as close as possible to the actual floor trade. Most traders on floor exchanges base their trading plans on order flows; simple trend identification through price action observation, and no more than one or two simple indicators. By contrast, most off-floor traders use systems loaded with a host of technical indicators, most of which lag because they are based on second-hand data. Such systems would do nothing for you other than hinder your attempts to trade successfully in the forex market. It’s no surprise that most off-the-floor traders lose, because relying on second-hand and lagging data in a fast-changing market like forex could only lead to more losses than gains in the long run.
In conclusion, we have briefly discussed three vital components for anyone seeking success in the financial markets to acquire. While many tend to focus on a good trading method as critical to success, you must realize that developing sound money management principles, as well as discipline, are even more important. Therefore, on the journey towards a successful forex trading career and professional status, one should look for a training course that comprehensively addresses each of these components properly and with the proper bias, without letting one suffers at the expense of another.