Sometimes we have to go to the basics. But if you heard something many times it doesn’t mean you’re also applying it successfully. Here are some common sense suggestions that will surely enhance your forex trading.
Use a demo account to test your trading strategies
Simulating your trades is always good when you’re trying new things and a demo account will help you with that without putting any real money at risk. So many times we forget to test things and just experiment on our money. Even if we risk very little, those experimenting costs add up quickly just like commissions and slippage.
All brokers offer demo accounts, so there’s no excuse. But don’t over do it either because some brokers may use different price data or liquidity providers in their demo accounts than they do in their real accounts. Another reason not to over do it is because you shouldn’t get too attached to your profits or losses in the demo account, as they don’t really mean anything other than testing.
Develop a solid trading plan and stick to it
This is beyond obvious and most of us are already doing it, or are we? Maybe you have a trading plan but it’s not solid. Or maybe you do have a solid trading plan but aren’t sticking to it.
The primary goal of a trading plan is to keep emotions out of the equation and to have a systematic approach to trading. So make sure your current plan does that and if not maybe it’s time to improve it.
When developing a trading plan, it is important to consider what type of trader you are. Are you a day trader, swing trader, or position trader? Each type of trader has different timeframes and objectives. Too many of us mix things up a bit too much at times.
Your trading system might be producing some results, but maybe you’re not using it at it’s max capacity, for example sometimes you still have indicators for time frames you don’t use anymore that can get in the way, but they aren’t distracting you enough to remove them, although you keep checking them out of habit even if your system doesn’t require them.
Be patient and wait for the right opportunities.
It’s often tempting to jump in and try to make a quick profit, but this can often lead to losses. Instead, it’s important to wait for the right opportunity before placing a trade.
This doesn’t apply just for entering the trade. TPs and SLs are part of it. Maybe your stop loss has a fixed pip value for every trade, but it’s tempting not to do the same with taking profits. So wait for the right opportunity to take profit as much as you do for your entry, don’t rush it. This doesn’t apply if you’re TPs are fixed based on RR, obviously, but
Stay disciplined and don’t over-leverage your account.
When you are over-leveraging, you are essentially gambling with your money and this is not a good idea. You should never over-leverage unless you really know what you’re doing and have plenty of data to back up your decision.
People usually overleverage when they want to recoup losses, this is a bias that makes you risk more the more you lose. If you are new to trading, it is a good idea to start with a small account. This way, you can learn the ropes and get a feel for the market without risking too much money. Once you have a better understanding of the market, you can then start to trade with more money.
Keep a journal of your trades to help you learn from your mistakes.
Some people like to use a spreadsheet, while others prefer to use a trading journal software program (like the mt4 journal). Personally, I prefer to keep a simple journal in a word document. I find that this allows me to quickly and easily track my trades, and it also makes it easy to go back and review my trades later on. Obviously for some of you, handwriting in a physical paper diary would be much preferred.
But the means by which you do it aren’t the point. Journaling helped me realize that I wasn’t using stop loss enough in the beginning. Or many other little things that escape your perception. It also helps with clarity. You can even write your entire thought process, because a psychological journal will be so much better. And last but not least, try not to write it as if someone else will read it, rather write it for yourself, otherwise you might end up writing things that don’t belong to a trading journal.