In the world of Forex, there are a few things that every successful trader can without a doubt agree upon, and one of those things is that you need a trading plan to succeed in Forex trading. When you first start trying to make money in financial markets, you probably aren’t trading with any sort of trading plan or strategy, for that matter. If you’re lucky, you’ll lose enough money early on before you realize that you need a plan when you come to play this game. So what exactly goes into a trading plan?
Over the years I have spent a lot of my time trading the Forex markets, until one day when a friend of mine introduced me to indices. What are indices you may ask?
Indices are a measurement of price of a group of shares that are bundled together in an exchange, i.e., the NASDAQ, S&P500 or the DAX.
Forex trading can be very stressful if you allow it to. In my experience, certain things are definitely going to contribute to Forex being a stressful venture. If you just note these and try to manage them, Forex can be a good challenge and test your limits without breaking you down and forcing you to reconsider your existence.
Revenge trading occurs when a trader enters a new position right after a loss in an attempt to make money back immediately.
Anger, greed, and the fear of being wrong cause a trader to act irrationally following a loss.
Let’s talk about wicks in Forex trading, many things are believed about where to draw trendlines and support or resistance lines. Usually, the question is, “Do I draw the trendline along the wicks of the swing points or just along the bodies of the candles and ignore the wicks?” You will get different answers from different traders about what to do, and that is it can be so difficult for beginners to know what is right and what is wrong. In this article, we will break down the answer for you.
Once your focus becomes process-orientated, you begin to seek percentage growth of your equity. At this point, you think more on the level of a hedge fund or bank. I say this because banks and hedge funds’ primary focus is percentage growth for themselves and their clients. They want to be able to tell their clients that they have 2x or 3x their initial investment.
Trading the Forex markets is simple, but it is not easy. As much as it is a skill like anything else in life, it is obtainable with enough effort, time, and patience put into it. It is essential for Forex traders and any trader or investor to recognize their inherent skills and work on the skills that don’t come naturally to them.
A risk to reward ratio in Forex trading is how much you are betting compared to what you expect to make from any one particular trade. If there was one thing I wish I took the time to understand better when I started out on my trading journey, it would be the importance of a good risk to reward on every trade.