With some basic knowledge, discipline, and computer and internet access, you can literally change your life. But with that freedom, also comes some realities if you truly want to be successful at it. And who better to listen to than those who have gone before, and can reassure you of some of the insights that will make you a successful trader.
In this article, we will look at 12 of the most important trading tips from market gurus.
1. Get a good Forex education. You don’t have to go to college or take classes in order to be well educated in Forex trading. There are plenty of online resources for free, or some affordable instruction and mentoring that can give you a really good foundation for trading. In addition, there are books like “Trading in the Zone”, “Technical Analysis of the Financial Markets”, or even “Market Wizards”.
2. Self-examine to assess your mental, emotional, and financial limits. Before you even sign up for a trading account you need to know your abilities and limitations very well. Know how much money you have to put into the market, and define what your risk tolerance should be. Also, know yourself. “What is it that turns ordinary betting into a reckless gamble? Desperation on the part of a heavy loser is one factor.” (Bernard Baruch) What stresses you out, and how do you react to it? Being psychologically unprepared is what kills most traders.
3. Choose your broker carefully. You can’t trade without using a broker, so make sure you do some research. Look at reviews, what platforms the brokers offer, the spreads, other costs, and maybe even try their paper trading (demo) platform to see how their technology works and keeps up without actually risking money.
4. Plan your trades and trade your plan. Develop a profitable trading plan and stick to it. Too often newbies will try to trade their plan, as well as random trades they think will be good too because their emotions tell them so. Don’t do it! Stick to your plan. That is why you have it!
5. Limit the number of currency pairs you trade. Even though there are 8 major currencies being traded, limit yourself to just 1-2 to focus on. Each of them have their own personalities and can react differently within the market. Take your time to master one, then move on to more if you want to.
6. Begin with small sums of money and let it grow naturally. Don’t keep putting money in your account. Just put in a certain amount, and other than your trading activity leave it untouched for a period of time. If you are successful at trading and it’s growing, you can leverage more. And if you are not successful, you will naturally be limited and not just dumping money into an account. “Why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain? I decided that I had to learn discipline and money management.” (Paul Tudor Jones)
7. Only do what you understand. There are hundreds of trading methods out there. You have to be confident in what you’re doing, so don’t use some trading method that you don’t understand. Look for something that is simple, fits your style of trading, and that you are comfortable with.
8. Keep your emotions in check. The statistics that the vast majority of Forex traders fail is true, and the main reason is because they cannot control their emotions. Without mental discipline, all of these other rules and factors go out the window and don’t matter one bit.
9. Keep a trading journal. There are no hard and fast rules as to what to put in your journal, but keeping track of your trades, e.g., why you took them, how they turned out, and your emotional state at the time. This will help you to shape and hone your trading skills.
10. Learn to be a great looser! The reality is even the most successful traders are going to lose a percentage of the time. You cannot chase the loss. That is how you will get wrapped up in your emotions, and loose a ton of money before you even realize what happened. Know when a trade is not working, and let it go. Physically step away from trading for a while if you need to, but don’t try to chase or make up for your losses. Don’t let a losing trade run in the hopes it will turn in your favor. Get out, and move on. “Experienced traders control risk, inexperienced traders chase gains.” (Alan Farley)
11. Humility and high probability. Never believe the lie that you can control the market because you can’t. You can only control yourself. Remember to stay humble enough to realize that, and watch for high probability trades that reveal a good set up for your trading plan. As John Maynard Keynes said, “The market can remain irrational longer than you can remain solvent.”
12. Perseverance. Michael Marcus said it best when he said, “Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough.” Anything worth doing well will take time. Follow the above rules with patience, and you will become successful in time.
Trading Forex can be an amazing and rewarding venture. By learning trading tips from those who have been successful, and adapting a few basic rules, you too can be on your way to being a satisfied and successful Forex trader.