For anyone who wants to become a prominent forex trader, it must be understood that trading skills need to be sharpened. The best way to do this is to spend almost all of your time observing the movement of the various market pairs, even if you’re not trading in them.
Another step towards achieving that goal is to visit websites that focus on different markets, like InvestingStrategy.co.uk. Each trade you make should be thoroughly analysed, both in the fundamental and technical aspects.
This way, as a trader, you’d be able to perform introspection better. In other words, you’ll be familiar with what pushes you to make a trade. Understanding the trading part of yourself is key, since greed and fear are the biggest factors that make a lot of new traders fail.
6 Tips to Enhance your Forex Trading skills
Here are six tips to improve your forex trading skills:
- Understanding that Losses Happen to Everyone
People view forex trading as a stress-free method of making cash. Even though forex trading is easy in a sense, it is not at all simple. The biggest factor that makes forex trading complex is the occasional loss.
Your entire forex trading career might be determined by how you handle these losses. Looking the other way and learning from these losses will allow you to offset the frustration accompanying them. You need to understand that even the best trading mentors experience losses once in a while.
Looking past the losses will allow you to clear your head and make calculated decisions after the loss.
- Learn Price Action Signals
Forget the numerous indicators that litter the market and focus on price action signal knowledge. Many newbie traders want to go the easy way and rely on indicators. Hence, they take on loss after loss.
If the entirety of trading relies on indicators, everyone will make money out of the markets. However, these indicators like Moving Average, Fibonacci, MACD, and RSI were created to support trading decisions.
To realise price action signals, first, you need to study single candlestick patterns. After that, you can move to double candlestick patterns and then basic support and resistance techniques. To practice your new price action signals knowledge, it’d be best to open a demo account before trying anything with your money.
- Establish a Stable Strategy
As a forex trader, trading based on your ‘gut’ leads to two possible outcomes – stagnancy or failure. You need to establish a stable strategy both in trading and risk management.
A stable trading strategy will allow you to make trades and calculate a win ratio to determine if your strategy is working. This way, you won’t make random trades and hope for the best.
A stable risk management strategy will ensure you make gains even when you lose 50% of your trades. To explain this better, if you have a risk-reward ratio of 1:2 on your trades, you’d need to win only 33.33% of your trades to break even, ceteris paribus.
- Utilize the Powerful Fibonacci Indicator
The Fibonacci indicator is one of the most powerful indicators out there. It is based on the Fibonacci sequence, and its ratios occur in everyday life.
This indicator is so powerful that it displays exactly where to make your trades, take profits, or stop losses. The Fibonacci indicator is best utilized in trending markets such as uptrends or downtrends. This wonderful indicator needs to be combined with other indicators or price action trading strategies.
- Practice Risk Management
Practicing risk management is one of the best ways to remain in aggregate profit in the market. Many traders try to chase losses by trading aggressively, leading to bigger losses. When you trade aggressively, it depicts that you’re abandoning your trading plan, or you don’t have one.
To create a risk management strategy, you need to divide your portfolio among a certain number of currency pairs. You also have to determine how much you’ll risk on each trade you make. Some traders follow the 2% rule and others take the 3% rule.
- Follow the News
News can make or mar your trades. Depending on the severity of the news, you could get closed out of your position when volatility increases.
You need to understand how fundamental and sentimental analysis works to decide what trades to make once high-impact news gets released. You could get an app on your device to alert you of forex trading and economic news.
Every trader dreams of becoming successful and making wins on all their trades. However, in reality, trading positions are fraught with losses. This requires the emotional strength of the trader.
To improve your forex trading skills, you need to understand price action signals, follow the news, and use the Fibonacci indicator. You can also practice risk management, establish a working and stable strategy, and understand that losses are meant to be learned from.