A few tips on how to be profitable in forex
|A few tips on how to be profitable in forex|
In this article, we are going to present several tips on how to be a profitable trader in forex. This tutorial allows you to understand the complexities of the forex market. Forex is the largest financial market.
Forex allows traders to benefit from several useful tools such as high leverage and 24-hour trading. The forex market rarely becomes calm and is always volatile and strange.
Forex traders hope to gain handsome profits from trading in this market. Institutional traders also form a large portion of forex participants. Billions of Dollars of currencies are traded in this market daily.
Trading forex is easy. But trading correctly and gaining consistent income is rather difficult. To be able to become a successful trader in this market, we have prepared 5 key tips to help you.
Pay attention to daily pivot points
Paying attention to daily pivot points is very important, specially if you are a day trader. But even if you are a long-term trader or a swing trader, understanding this concept could help you. Why? Because thousands of other traders who trade actively in this market, take these points under consideration.
Trading based on pivot points, could form the future. This means that, the market is always after resistances and supports, or is constantly forming pivot points, in which the market reverses trend. The reason for this event is that many traders place orders on confirmed pivot points, therefore, the validity of the so called point increases.
So, a lot of times that a major movement occurs in the market, it takes place on pivot points. In fact, there are no fundamental reasons for these movements. They are only made because a large portion of the market placed orders on that point and finally caused the market to move.
To be clear, we don’t recommend you to proceed in your trading, only by relying on pivot points. Instead, we recommend you to always pay attention to pivot points regardless of the strategy you adopted, in order to be able to determine whether the trend continues or changes. Look at the pivot points and investigate the events that formed around them, and use them as a technical indicator to confirm your strategy.
Wait for real opportunities
The most successful traders are those who risk only when a real opportunity knocks on their door. This opportunity could bring the trader the edge, and increase the probability of winning.
This edge could be anything. It could be as simple as buying in a region which you have identified as a support region, or selling in a region which you have identified as a resistance.
You could increase your odds of winning by using several technical indicators. For instance, if the 10, 50 and 100 period moving averages converge to the same price level, it could be considered a major support or resistance in the market.
One other thing that could assist you in decision making, is that the technical indicators in different timeframes converge to form the same support or resistance zone. For example, when the price chart in the 15-minute timeframe moves towards the 50 period moving average, while the price moves towards the 10 period moving average.
Protect your investment
One of the most important concepts of trading is to protect your investment against existing risks. In forex trading, avoiding loss is more important than gaining large profits. If you are a novice trader, you might not comprehend this well. Nevertheless, this is a fact. Money management and preserving your investment is one of the most important parts of trading forex.
Why is money management this important in forex? Because most traders loose their investment before even getting used to trading forex and learning it properly. Novice traders tend to loose their money before totally understanding the mechanics of such market.
It could be concluded that having a proper risk management in forex, could lead to success. If you only be able to protect your money from drastic losses, you have the chance to continue trading and become a successful trader eventually. In this case, you just need to gain consistent profit. Even if you don’t become the most successful trader, you could live off of trading by gaining a moderate income.
But if you want to have enough income, you should also have enough investment. Only then you can use trading opportunities to the fullest.
To practice the art of risk management, try to avoid excessive trading and risking too much. In this case you will be able to keep your losses at a minimum range.
Keep your technical analysis simple
Herein, two different traders are compared with each other. Trader A has a big office. He has access to special computers, which have several monitors and follows the economical news around the world. Several charts are shown on the monitors, each of which using 8 or 9 technical indicators.
Trader B works in a relatively simpler office. He uses only one computer or laptop. This trader analyzes his chart using just 2 or 3 technical indicators.
If you think the first trader is the more successful one, you would be probably wrong. In fact, the second trader shows a better picture of a successful trader, since the adjustments he uses are simpler and more realistic.
A trader can carry out technical analysis in several manners. But using too many strategies isn’t necessarily helpful. Using numerous strategies only leads to confusion and complicates decision making. This will unable the trader to determine the correct status of the market.
A simple strategy is a strategy which has several trading rules and uses a few technical indicators. These strategies are expected to have a higher success rate than the complicated ones. Some traders might not even use technical indicators at all. These traders don’t use trendlines nor RSI indicator or Expert Advisors.
These traders analyze only by looking at the candlestick patterns on charts. The strategy these traders use involves common patterns which form on the chart. One of these patterns is “Pin bar”, which is also known as “Hammer” or “Shooting star”. Sometimes these patterns take place on supports or resistances and form reliable trading opportunities.
Use stop loss
It may seem that stop loss is only used to prevent further loss and protect your money. But using this order actually plays a crucial role in gaining profit too.
Many novice traders think risk management is about placing your stop loss too close to the entry point. It’s also important not to place your stop loss too far. However, one thing that always causes failure in trading, is placing stop loss too close to the entry point. In this case, your stop loss order might get activated and force you to exit your position with loss, before only changing direction and moving in your favor. In this case, you will see that you would have gained profit if you have placed your stop loss a little wider.
That being said, it is always important to find trading opportunities, which don’t force you to place a very wide stop loss. But this is also worth mentioning that placing stop loss should be according to your technical analysis.
Like any other investment, forex has its own ups and downs. In order to gain profit in forex, you should keep the mentioned tips in mind and constantly practice them. The important tips explained in this article are summarized below:
- Pay attention to daily pivot points
- Wait for real opportunities
- Protect your investment
- Keep you technical analysis simple
- Place stop loss properly
Of course, this tutorial doesn’t include sufficient information in order to become a successful trader in forex, but it could be a good starting point. If you pay attention to these rules all the time, you could become successful through practice and hard work.
Always create a demo account before entering the real market. Aron Groups Broker allows traders from around the globe to practice the art of trading on a demo account without exposing their actual assets to risk. You could also put your new strategies to the test using the demo account feature.
Written by: Mohsen Mohseni (Aron Groups).