It is often said that no one can beat the forex market as it is influenced by several price dynamics that vary in scope and size. The truth is, it is possible to beat the market but it isn’t exactly easy. Take a look at these tips that might help.
Be mindful, however, that most of these ways are difficult to put into actual practice because human error and emotions can get in the way of making trading decisions.
1. Come up with trading plans.
Losing is part and parcel of forex trading as there will be instances when the market has some surprises up its sleeve. This can be in the form of unexpected events which cause a huge ruckus among currency pairs.
During these scenarios, you should be able to figure out what to do ahead of time before the actual situation takes place. You should have a plan for exits or scaling out, as well as for holding on to your open trade.
2. Proper risk management is key.
Being greedy can be damaging to trading decision-making as it typically entices the trader to risk too much or to have a trade without a proper stop loss in place.
Having a line in the sand for your account and setting a maximum tolerable loss amount can help you stay profitable in the long-run if you are able to keep trading with a decent win rate.
3. Trade the high-probability setups.
It helps to cherry-pick the setups that are more likely to win and ignore those that have a low probability of ending positive. Technical and fundamental analysis can come in handy in picking these setups.
These strategies are usually implemented by makers of mechanical trading systems who come up with a set of trading rules, determine the risk management parameters, and have backtest results showing the system’s profitability.
Traders who are still learning the ropes in the forex market or those who cannot devote their entire day to forex trading may simply decide to subscribe to a forex signal service that already generates buy or sell alerts.
Mechanical trading systems already include trading plans and risk management rules, which the trader can adjust depending on his preferences. Backtest results can also be a gauge of how likely the system is to be profitable.