How to be Successful in Forex
As you establish your trading strategy, what things should you consider
to make it successful? What are the major differences between a good,
successful strategy, and an abysmal failure? Really, the list is almost
endless, but there are a handful of crucial factors no trader should
First, you have to eliminate the small things that can lessen your
profits. On the most basic level, find a brokerage with very tight spreads.
You should also be aware of any hidden fees or other commissions your
broker might charge. You should also make sure that your broker doesn't
expose you to slippage - when an order is executed at a slightly different
price than you asked for. Finally, you should pay attention to the additional
costs of trading on margin. Once again, some brokers hide their fees
or structure them in non-transparent ways. You should know ahead of
time what trading on margin will cost you, and find a broker who can
minimize this cost for you.
The reason that it is so important to eliminate these small losses
is that you can be sure that they will always be there. Almost everything
in forex trading involves probabilities, but this is one cost that you
know will affect you all the time. So even though these costs may be
relatively small, they will certainly add up over the long haul.
After choosing a broker, the most important thing is to establish a
consistent strategy and stick with it. This is where education can make
a big difference. Some of the best methods for finding and analyzing
a strategy are mathematical and quite complex. But at the core, the
most important thing is discipline. Forex traders lose the most money
because they respond to the market emotionally. A clear plan helps you
objectively determine what you should be doing, regardless of how you
This is where you can use the past to your advantage. Once you have
established a strategy, try applying it to historical data. In other
words, work through what happened a few years ago and ask how your strategy
would have guided you to respond. If you don't think you can be honest
about it, go to a period when you weren't trading and don't already
know what happened. Now apply your strategy to these forex charts and
see if it would have been successful. This process is called back-testing,
and it lets you see whether your plan will really work.
Once you have established a pattern of trading, you can benefit from
powerful assessment tools. For example, z-score helps you look for patterns
in your trades. You might discover, for instance, that most of your
earnings and losses come in streaks rather than randomly. This would
encourage you to strengthen your position when you see the beginning
of a winning streak, or hold back when it looks like the beginning of
a losing streak.
In summary, the process of establishing a successful strategy is a
matter of working through everything and eliminating problems one by
one. This process also becomes more specific and more technical the
further you progress. Finding a broker is fairly basic; outlining an
objective strategy and following it is more involved; analyzing your
plan with statistical models requires significant experience and skill.
The one thing that stays the same through the entire process is the
need for good education and help from experienced investors. If successful
forex trading could be described in one phrase, it would be this - be
willing to learn from other people and be critical of yourself.
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