Tactics are important in Forex trading, but unfortunately many traders and investors in the Forex market, don’t adopt proper Forex trading tactics.
Adopting good Forex trading tactics will help you to become a more successful Forex trader and more success means more profits.
One good tactic to adopt, would be to not use more than money than you can afford to lose. It’s far better to use money that you can afford to lose – you will be calmer and more rational, which means that you will be able to limit the effect that the psychology of Forex trading has on you. In fact, you could just open a micro or mini account, as these accounts will allow you to trade micro and mini lots, meaning that you won’t have to risk as much money as they are considerably smaller than standard lots.
Another good tactic to adopt, would be to not over trade. When you over trade, you will most likely lose out; even if you are making more trades, those trades will most likely not be as good as the trades you could make by being more careful and taking your time – you could even deduce losses. You need to take your time, so that you can spot better trends, spot better patterns, find better entry points and find better exit points.
You need to be individual when Forex trading, after all, you are trading Forex on your own – so, you need to think for yourself. Don’t buy into everything you hear; many beginners buy into everything they hear and all of the fraudulent marketing that surrounds currency trading. Think for yourself and use your common sense – this is actually a good tactic in itself.
Day trading can be a good Forex trading strategy, but most of the time it isn’t and this kind of strategy is especially not ideal for beginners. A tactic to adopt in this case, would be to take it slow and not think that you know it all as you will only lose all your money. Be honest with yourself and understand that many beginners lose all of their initial deposit through checking their trading platform all day everyday, trying to make fast profits. Place a good order and leave it – your stops and such will work for you.
You should try not to open up too many positions at once if you are a beginner. If you’re more experienced then you will be fine with managing multiple orders, but one too many as a beginner and you will find yourself in great difficulty. Keep it simple if you are just starting out. Whilst it is good to spread risk, it’s better to go easy on yourself in the beginning.
Never trade more than 2-5% of your total trading account’s capital. If you place an order worth over 5% of your total trading account, if your trade is bad, your account will take a lot of damage. Be careful with your allocation of capital. You need to focus on smaller trades and more modest profits, so that you can remain disciplined but also consistent – think about the long-term profits that you will be able to make, rather than the short-term ones that aren’t as nearly as likely to come. This means that you will also want to limit your use of leverage.
After seeing some success, don’t think that you have suddenly found a magic formula. It is perfectly normal to make good and consistent profits in the currency market, despite the fact that many lose out. If you are educated and practice, you will most likely see some kind of success sooner or later, but don’t get overexcited – or overconfident, more specifically. If you have too much confidence, you will find yourself risking a lot more of your capital in average trades; you will begin to think that you will be able to win every trade, but of course this isn’t the case. Stay disciplined and consistent and always think about the long run.
Be careful with your stops too; think carefully about where you place them, to prevent them from being stopped too easily. Also, don’t put them too far off of course, so that you don’t make hefty losses. Make sure you adopt good money management techniques, during your Forex trading career, for optimum results. Risk management techniques will also go hand in hand with money management techniques, so take equal care with your risk management, it is also an important aspect of Forex trading.
In conclusion, in order to increase both your chances of success and profits in the FX market, you should adopt proper and effective Forex trading tactics. Good tactics to adopt, include: not risking more than you can afford to lose, not over trading, thinking as an individual, taking it slow and easy, limiting the amount of positions you open up, not risking too much money per order you place, being disciplined and consistent, adopting good money management techniques and adopting good risk management.