4. Make Calculated Decisions
You should enter the market prepared. You should know, in advance, where you intend to open and close a position based on the system that you are following in order to focus on your system and avoid last minute doubts.
You should also have stop-loss orders in place so that you are prepared when the market does not agree with where you placed your order.
Do not trade with your emotions. Make sure that you are not overly emotional while you are trading, and if you are, consider stopping until you have calmed down. When in the market, you do not want to make any rash or uncalculated mistakes. You want to trade logically and not emotionally.
5. Utilize Stop Loss Orders.
Knowing when to cut your losses is crucial in the marketplace. Some individuals hold on to a losing position for too long because they are hoping and waiting for the market to come back up. Some individuals also exit a winning situation too early which eliminates chances for a greater profit. But as was mentioned in tip#1, patience is key. You must be patient and enter only the trades which you believe will have a positive income and follow this with the strength to either cut the trade as soon as it turns against you, or go with it because you believe in the trade.
Upon opening a trade, you can set a stop loss order. This is the point at which the trade will automatically cease and shut down if the market moves to that position. You should consider placing stop-loss orders on all of your market orders because by not leaving one, you are gambling away the entire value of your account. By utilizing stop-loss orders you can automatically sell a long position if the rate decreases to a certain point, and in this manner you can limit your loss on any given trade, even if you cannot monitor your account nonstop. Take-profit orders allow you to set a rate at which you want open positions closed in order to keep profits. You just have to recognize the rate at which to take the profits and the system will close the position without you needing to watch over it constantly.
What sets seasoned forex trades and new forex traders apart is the seasoned traders ability to determine when a losing trend is not going to reverse. They know when to cut their losses. If a trade hits a stop-loss, you will lose the money that you committed but you will also protect the rest of your money, leaving you with capital to invest in something else that will hopefully be more profitable. Sometimes you must see things as life lessons, learn and move on.
6. Stay Strong.
Once you have a plan in place, you must have the patience and the discipline to actually follow through with it. It may be difficult to do so, but it is a must if you want to succeed, and it is why having a plan is so important. It is only human to second-guess your actions once the marketplace starts moving and shifting. But if, prior to entering the market, you had a sound reason to establish your take profit and stop loss limits, the conditions have not changed just because you have entered the market, so you must follow your plan and not change it in the middle of the battle. Do not act on emotion. Always act on analysis. After you have left the market and the volatile situation, you can of course revise, learn from the experience, and change your limits for the next time. But do not do so in the middle of an exchange. It is true that the market can be so volatile that no plan will turn out with positive results. But you should learn from your experiences, read up, practice, and never let yourself fall into the I must do something trap.
If you are strong and stay true to the tested trading plan, you will make more profit than those who do not trade consistently. You should always plan instead of randomly picking out trades in the heat of the moment. If you want an edge above others, you must follow a solid trading plan. You should be consistent in your trading system and collect analysis on your process so that you may see what you are doing wrong and adjust your plan in the future.
7. Pay Attention To The Rate Spread Fluctuations and the Impact Spreads Have on Profitability.
The difference between the ask price and the bid price is called the Exchange Rate Spreads. These are critical and affect profitability directly. You need to be conscious of the fact that spread differentials can change drastically throughout the day. They may turn a profitable trade into a losing one. You must also realize that forex spreads widen during off-market hours, at which time volumes and liquidity are decreased. Moreover, spreads have a tendency to widen before important news like an impending interest rate decision or the latest unemployment results.
4. Make Calculated Decisions