3 Secrets Of Successful Forex Traders
Becoming a successful Forex trader is a process. Most would-be traders don’t become profitable on their first try, or even the second or third. But those that take the journey and make it to consistent profits learn a lot along the way. Here are three things you should know if you want to become a consistently profitable Forex trader.
There are a lot of different ways to trade Forex, from scalping the lower time frames to trading on the daily and weekly time frames. But in my experience, it is the traders that have the patience and stamina to trade the higher time frames that do the best. Lower time frames are less reliable, ironically take more time in front of the computer and end up being more stressful than higher time frames.
When I started, I was drawn to the lower time frames. I thought I could learn quicker and make more money in a shorter period of time. I thought I could keep my stop losses super tight and use higher lot sizes to rake in large money in minutes. The opposite was true. However, when I switched to higher time frames, success started happening more regularly. So, the first secret is to start trading on time frames from 1 hour to daily. (My favorite is the 4 hour time frame).
New traders want to make more money on each trade by using big lot sizes. A lot of times this means using too tight of a stop loss instead of the proper stop loss based on price action. As a result, they get stopped out a lot and lower their winning percentage.
Controlling your risk with proper lot size and stop loss is a better way to trade. Place your stop where the market tells you, and then adjust your lot size to manage risk. This way, you can risk the same percentage of your account on each trade, regardless of whether the stop is 20 pips or 200 pips. Therefore, the second secret is to us proper stop loss size and manage risk by adjusting your lot size.
Forex trading is not gambling. And you can see by the first two recommendations, successful traders move away from the fast time frames with unrealistically short stops “hoping” the trade goes in their favor and makes them a ton a money. More often than not, this approach leads to losing a lot of money, and then any win you have only gets some of the loses back or to break even.
The best way to succeed is to treat your trading like a business and developing the patience to build your profits over time. Create a trading plan to “get rich slowly” and develop the patience to trade the plan perfectly, and you’ll do a lot better in the long run. In the end, treating your Forex trading like a serious business is what allows you to create serious profits.
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