One of the most common mistakes new Forex trader to do, is they do not have a good forex trading strategy. Forex has the interesting characteristic of open for 24 hours, liquid, has the leverage, etc., most novice traders enter the market wants to prove himself in an egoistic approach. Selfish in the sense that they believe that they can be very profitable trading and making lots of money in the short term, but long enough they ended up with bad psychology, which in turn accelerate the pattern of loosing them. In fact, the most successful Forex traders are the ones recognized for their humility and discipline. This quality is obtained through experience and receive some simple realities of the Forex market.
Designing a Trading Strategy
The first step to become profitable in the Forex market is to design a trading strategy / plan. Create a forex trading strategy is very important and is actually very easy.
To create a successful trading strategy, traders must consider the following matters:
1. Reasoning trade: Why buy or sell?
2. Left trade: Why now? Before the release of economic news or afterwards? Want to trading during the day or night?
3. The purpose of trading: how many would take advantage of pips in a day? How much do you put stop loss?
4. Money management.
5. Documentation and analysis of results.
Before you make transactions there should be a good reason. Many traders enter positions times of boredom or just feel the excitement of having just profit. This is a recipe for disaster! You should always buy or sell any of the reasons that make sense to you. Is this the reason is fundamental or technical or both, make sure there is always a reason. Okay?
What currency pairs that you trade?
This sounds simple, but can be confusing if you do not define it correctly. From our experience, we strongly believe that the best (according to many professional traders) are concentrating on some (not all) the currency pair (such as EURUSD, GBPUSD and USDJPY). But I do not know, I did not even match the USD / JPY. Slowly but washed away, so if I may comment. Now that is gone chart USD / JPY on my metatrader.
You also have to determine when you are on and how often you trade in it. Are you going to be a daily trader or who holds a position for a longer period of time
Are you in trading before the release of economic or thereafter? Are you in a trade focus at night, when England open and closed markets, etc.?
It is important to determine the basic ideas to begin to establish some consistency and discipline.
The second step is to determine your trading objective.
To create a forex trading strategy, it is necessary to consider the following: What is your final destination? How much you will take profits and use stop loss? Try to place your take profit and stop loss set before entering your trade.
Most traders tend to take their profits early while and let their losses run. This is because the mindset is not an experienced trader who is very difficult to accept that he is wrong.
Placing your stop loss when you open the trade will help you make the discipline and learning that sometimes you would be wrong. In addition, most new traders have a goal that really realistic. Making a big return in the first year of trade is possible but highly unlikely.
Money management is probably the most important aspect of trading.
First you must accept that the trade is to have a ratio of 100% win and everyone (even the most experienced traders) are sometimes wrong. Accept that sometimes you may be one more important. The key here is to accept you're wrong before you become too big mistake. To do that you need to determine how much you have equity fund your account. Then you must determine how much risk you are willing to take every trade. Most traders at risk of 1-4% of account balance on each trade. This may seem too low for new Forex traders, but it definitely will help you avoid big losses, creating the necessary discipline and make you in the market to gain the necessary experience. Also very important is to have a positive percentage of winning trades than losing trades and positive average profit compared with an average loss ratio. If the loss of an average of two times your average profit which means you need to make 10 profitable trading to close five trading loss. Remember this.
Along with managing money, it is important to track the trade in your past and your results to recognize and avoid past mistakes you in the future.
This is just the beginning foundation for a successful forex trading strategy in the long term but it certainly will help new traders get the discipline required to keep a profitable forex trading in the Forex market very attractive.