3 Currency Trading Tips to Help You Make Money
There is a lot of money to be made in foreign exchange trading. Here are currency trading tips to help you maximize your profits.
1. Use weekly charts as well as daily charts
Checking back over the week’s price movements for your chosen currency pair will give you a better perspective on both short and long term trends in the market. It is easy to become blinkered in spot forex trading especially if your method concentrates on day trading. Weekly charts allow you to take a step back.
Sometimes the new perspective that you gain in this way will help you see what went right or wrong with your trading and why. This can help you to refine your systems to make them more profitable. However, do not make changes in a good system every time something goes wrong. There is a need for balance here.
2. Do not trade too much
It is tempting to jump into the market and open a trade whenever you think you spot an opportunity, when really you should have held back. It is often true that the fewer trades you make, the more money you will make. This seems counterintuitive because we tend to think that we need to make a lot of trades to build up big profits. But opening a trade at the wrong moment leads to losses, so in fact the opposite is often true.
You need to be comfortable with risk in order to engage in forex trading. Most traders even enjoy the risk. So it can be difficult to hold back from something that looks like a big opportunity. Remember this is investment, not gambling. You must choose your trades carefully. Taking chances in the hope of making a big killing is likely to lead to your account balance taking a hammering.
If you have a profitable forex trading system that does not often offer the opportunity to trade so it is not making you much money, do not be tempted to widen the criteria so that it lets you trade more often. This will almost certainly turn your profitable system into an unprofitable one.
Instead there are two things you can do. First you can increase the amount of each trade. This increases your risk and is probably not a good idea unless you are very sure of your system. Second you can try to find a different system that is equally profitable that you can operate alongside the first. This is the better option for most people but make sure that you test your new system thoroughly before adopting it.
3. Set realistic targets
When you are thinking about how much money you hope to make with currency trading, it is important to be realistic and accept that sometimes you will lose. You should only be trading with money that you can afford to lose and do not expect to double your money over and over in a short time.
Unfortunately many advertisements lead you to have very high expectations. You may see an ad that suggests you can double your money in 7 days, for example. This does not mean you are certain to double your money, and it definitely does not mean that you can do it every 7 days with no setbacks. Doubling your money in a short time is possible but doing it over and over without losses is not realistic. Expect to take at least one step back for every two steps forward and have reasonable targets by comparing with what you might make if you invested in stocks or bonds.
Before starting forex trading for real, be sure you are armed with sound strategies that you have tested for yourself. Weigh up all of your options and remember that you are entering a risky business. Keep these currency trading tips in mind and give yourself the best chance of succeeding as a forex trader.
