How to increase consistency in making money doing Forex Trading. Image credit: AdobeStock
As a Forex trader, your eyes are fixed on the Forex trading pairs and the factors surrounding their fluctuations. These factors include geopolitical events, climatic changes, inflation, import and export value, monetary policy and economic performance, as well as interest rates. When you speculate on a change, you can trade and get a profitable result in the end. However, Forex trading is not as easy as it sounds. It has its hurdles and challenges that a trader must brace up for. In this article, we will learn tips to help you increase consistency in profitability while practising Forex trading.
1. Select and Test a Trading Strategy
Forex trading has four major trading strategies: scalping, day trading, long-term trading, and swing trading. Each strategy has its pros and cons, and a trader must learn all of them and determine their viability. You can narrow it down to at least two of them and see how they function. Today, there are tools and software available for Forex trading, and you can test these strategies on the software before practising with real money. If the strategy works well, you can then adopt it. (Source: https://www.sec.gov/tm/investor-alerts-bulletins/investoralertsforextradingpdf.html)
2. Set a Risk/Reward Ratio
There is no guarantee that you will get more than 50% of the winning trades. Before you set out on any trading expedition, you must set a risk/reward ratio mostly to 1:2 or higher to know your expected earnings. Not only does this improve the odds for success, but it also gives the trader great insurance on their money. The ration must allow you to earn decent payouts even with winning trades less than 50%.
3. Focus on Trading
Making money on Forex requires that you focus on trading and not just making profits. According to research, directing your focus to money often makes you lose the major picture for financial freedom and sustainability. If you want to make money in Forex trading consistently, you must fully concentrate on trading. During this time, you can also focus on mastering the Forex trading strategies so you can understand all their perks and shortcomings. You can then combine two of them in different pairs and await the results. Let the money come as an incentive but not as your initial thought.
4. Discipline and Organisation is Paramount
Every trader must be organised and disciplined in Forex. You need to know what you want to gain from the markets and whether the approach you intend to use is disciplined. Coming up with a trading plan can seem like a simple task, but it contributes a lot to the organisation. You should also formulate a risk management plan to cover all the activities you will have on the market. If you begin a strategy, give it up to 21 days before you can roll over to another. This way, you can know the strategies that work for you and differentiate them from those that do not.
5. Set Realistic Profit Goals
Forex trading is not a get-rich-quick scheme. Even after you have come up with all the strategies, you realise the need to set goals that can be actualised. Usually, every pair in the market has a given average daily volatility. Most of them are typically from 4 to 10 pips per day (under normal circumstances). As such, setting your profit goals to 100 pips for these pairs may be unrealistic. However, it is important to know that daily fluctuations can cause an increment in these values from time to time. It is not an every-day thing.
6. Get a Trade Journal and Consistently Update
A trading journal will help you know the days you made a profit and those that you lost. Within the first week, you should track the progress and measure your weekly earnings or losses. Additionally, a trading journal is a great way to stay motivated at all times. Seeing your profits, losses, mistakes, and notes will help you refocus even better.
7. Perform a Weekly Analysis
Most global markets close on the weekend. This is a perfect time for you to study the weekly charts and look out for trading pairs patterns. Be very keen on global news, especially from powerful countries, as they will determine these pairs’ course. If you notice a certain pattern or curve forming, it means that it will continue being so for the next few days until a major change occurs in the geopolitics of commerce world. With all these findings from the analysis, you can make a more objective plan for the new week and make more profits.
8. Perform Extensive Research on Forex
Being in Forex means that you consistently learn everything there is to Forex trading. You must stay abreast of the latest economic trends as they hugely affect currency values and patterns. As a beginner, it is difficult to keep in mind all the currency pairs in the markets. You can begin by studying the eight major pairs and studying their history in the past one or two months. From there, you can check the factors affecting Forex trading such as the GDP, CPI, unemployment rates, important releases, as well as interest rates and economic trends in the markets.
9. Be Ready to Invest
Once you have learnt all these tips, the only part remaining is to invest. If you expect consistent earnings on Forex, you must also consistently invest. As you invest, be careful with the trends and patterns so that you are not investing in losing currency pairs.
Forex trading is one of the easiest yet most demanding ways of making money. Your progress and success are dependent on the trading habits that you develop. If things are not working for you at first, you can always change to another most favourable one. As you transition, learn to practice reasonable patience so that you do not overspend on a futile technique. Keep your eyes open to learning new things and tricks, and you will be a successful Forex trader.