Steps to Forex Trading Success

Whenever someone is looking to start trading forex, they should always have a plan or an idea of how they are going to go about doing it. The most important thing is to plan in order to be successful. Here we have put together step for being successful while trading forex. Each step is important in the process and you will want to pay attention to the ones that you may not be doing yet.

  1. Identify Current Long and Short Term Trends and Which One to Trade

  2. As a forex trader, you will come to realize that there are certain time intervals that you become most comfortable with while trading. Even though there is no time frame that is guaranteed to work, we would suggest starting with a long-term chart and working your way down to the short-term charts.

    By looking at a daily chart first, it will help you determine the long-term trend. You will find that this long-term trend will be one of three trends – an upward, downward or sideways trend. By figuring out a possible position trade on a daily chart will help you to look for specific indicators in shorter time interval charts.

    Choosing a trend is one of the first and maybe the most important decisions that you will make after reviewing long and short term trends. The saying “The trend is your friend” stays true today as it has in the past. This is the number one tool used throughout history. Remember, it is vital to follow a trend and not anticipate one with an early entry.

  3. Check News and Market Announcements

  4. The forex market is driven mainly by world financial markets and domestic and international news. It is crucial to stay on top of breaking news, economic announcements and monthly and weekly reports. A good trading strategy t have it to make sure that you are comfortable with the potential news if you plan to enter a trade before the news is released.

    There is some news that will affect the market very quickly and severely. Other news events, such as wars, government elections, holidays and bad weather may have significant impacts that may be unique to specific forex currencies. This means that getting to know the behavior of certain currency pairs can be very important.

  5. Identify Support and resistance Levels

  6. Knowing support and resistance levels will be very important and will need to be used correctly. Support and resistance is not only used to determine entry and exit prices but also in setting stop-loss and limit orders. Properly identifying these price levels will help understand why a currency changes trends.

  7. Use Studies and Indicators for Entry

  8. By using several charts and indicators, you will be able to make better choices when entering into a position. This is one of the most important aspects to trading and will help ensure you are making profitable trades. It is important to have indicators that show the same trends and to stay away from entering a position where indicators show mixed signals.

  9. By at Uptrends or Sell on Downtrends

  10. In order to maximize profits, you should always be looking to enter or add positions at uptrends or downtrends. As you may already know, the market moves in trends and it also has small retracement trends as well. By entering either at downtrends or uptrends, it will allow you to enter stop limits for a true trend reversal and avoid getting stopped out by a retracement.

    You can also use Fibonacci retracement tools which can help in calculating a buy or sell price, as well as determining the currency pair’s retracement potential. Something to consider as well is to look at currency pair’s trend history in order to determine what the retracement percentage usually is.

  11. Good Money Management

  12. Using a good money management plan is the final step on the way to success. The one thing that you need to know though is that this is probably the most important step as well. Good money management will minimize capital loss and maximize your profits. This is the best tool for trading forex with success.

    Remember to follow the same rules of your money management each time and accept your losses. Never trade with money that you can’t afford to lose no matter what market you might be getting into. If you are trading with money you can’t afford to lose then you will be trading with nerves, which means that more than likely you will make bad choices based off of emotion.