In part one of Best Forex Tips for Successful Trading, we presented some useful advice every beginner trader should read and try to follow. Today, we continue with the second part of our list with useful suggestions that can help you improve your Forex trading skills.
Understand how leverage works
Forex leverage (or margin) is a unique trading feature that allows traders to open large positions with a small amount of money. For example, if you use 10:1 leverage you are able to open a $1000 trade with only $100 from your live account. Leverage gives you the chance to make a profit with a relatively small investment. You should remember, however, that leverage can increase both your profits and losses, that’s why you should use leverage carefully.
Choose your strategy
Most traders use either a fundamental or technical analysis when creating their trading strategy. Hence you should find out which approach best suits you. For example, if you study carefully the macroeconomic factors (which include unemployment data, central banks decisions, political situations etc.) before you make a decision, then it is most likely that you will choose the fundamental analysis approach. Traders who prefer to follow the chart movements of currency pairs will probably prefer techniques that are based on technical analysis.
Study your trading performance over time
It’s important to keep track of your trading activity over time by keeping, for example, a journal or diary. This will allow you to analyze your successes and failures and to find out what works and what does not. Once you’ve identified your weak spots and mistakes you can adjust your trading strategy and try to eliminate them.
Beware of Forex products promising 100% success
Even though some Forex robot and software providers claim to offer strategies with “remarkable” results and huge profits, there are no strategies that are always 100% foolproof. The same applies to all kinds of robots and tricks that guarantee 100% success if you purchase their product. Don’t fall for such claims as they are most likely untrue.
Follow the financial markets
The Foreign Exchange market is very dynamic and it is very important to know the current market trend before you open a position. What may seem as bullish market may quickly turn into a bearish one and you should be prepared. You should always read an economic calendar and know what economic news and reports will be released that week and day. Get up-to-minute information by finding a reliable financial news provider. Check your open positions regularly because sometimes significant changes in the trend can occur in seconds. You should be ready to react quickly or have placed limit or stop orders in advance to prevent any losses.
Balance your investment portfolio
As you gain more experience in currency trading, you should consider other instruments as well. In addition to Forex you can trade CFDs on shares, indices, gold, oil, and other instruments, all from one trading platform. This is called portfolio diversification and it enables you to mitigate risk by not depending on just one asset. LiteForex also offers a wide variety of instruments you can choose from. Check out each instrument type to determine if this is suitable for you. Before you begin trading a new instrument, it’s always wise to trade it first on a demo account so you can analyze its market movements.
Trade on the go
Trading has changed a lot over the last few years as more and more people now own a smartphone or tablet. You can now download a mobile application of the MT4 platform and access your live account wherever you are. This way you can monitor your open positions and even place new trades from your mobile. LiteForex offers its MT4 platform for a variety of mobile and tablet devices, such as: iPhone, iPad, Android and Blackberry.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.