5 Principles and Practices for Forex Traders

As the forex markets attract so many casual traders, there are a lot of common mistakes that people tend to make again and again when starting off.

However, there are certain principles and practices that can help with successful trading. Here are a few of the important routines that you can incorporate into your trading strategies to make sure that you are making the most out of your trading journey.

Have a Proper Staking Plan in Place

As the forex markets can be very volatile, it is vital that traders have proper risk management plans in place. The most profitable traders will only be using a small percentage of their total account balance when placing a given trade. It could represent maybe 1-2% of the total funds they have available to them to trade.

This means that there will be a cap in place on the total funds that the trader will commit to per trade. Therefore, if things don’t work out, you won’t have wiped out a significant portion of your trading funds. You can take the hit, learn lessons from your mistake, and move on.

Put in Place a Proper Foundation

When you’re starting off as a forex trader, it is important to build a proper foundation before getting too far ahead of yourself. This means learning all of the fundamentals associated with the world of forex trading, such as the lingo, basic strategies, and the types of tools available to you on leading forex trading platforms.

While there is not going to be one perfect roadmap to follow, there are a lot of things you can do to put the odds a bit more in your favor. A good way to keep track of your current strengths and weaknesses is to keep a trading journal. This will allow you to identify areas where you can improve, as well as aspects that you can continue to focus on.

Be Patient

It will take time for you to become comfortable with life as a forex trader. There is so much to learn in the beginning that some people will feel quite overwhelmed with the huge amount of information that they need to take in. However, you will quickly start to feel more and more at home with the terminology, trading principles, and so on.

You will start to learn about why certain trades are successful and why others fail. The base of knowledge that you have will constantly expand if you put in the time to continually learn. Over time, you will start to see commonalities when it comes to potentially profitable trading opportunities, which can pay off in a great way.

Focus on Win Rate

If you are keeping your stakes consistent enough from trade to trade, it is important that you have more winning trades than losing ones. This means that you know you’re on the right path to success. By looking back at your recent results, you should be able to figure out what your win-loss ratio is.

Successful traders will be aiming to have a win-loss ratio of greater than 50%. While it’s not the sole determinant of success, it does give you a quick view of how you are performing as a trader. Hopefully, you will be able to see an uptick over time in this ratio, reflecting the improvements you are making yourself as a trader.

If you are concerned with your win-loss ratio, then you will need to use it as a sign that certain things in your approach need to change. This can be a useful exercise, as you can look to discard what is not serving you too well and embrace those aspects that are still performing strongly.

Only Up the Stakes if Comfortable

Everyone who trades will be hoping to maximize their profit level. However, this should not be pursued in a way that is risky or out of control. When you start off trading, you might not even risk any real money. There are virtual fund accounts you can use in order to get to grips with the world of forex trading and to try to stress test your strategy.

When you begin trading with real money, your account balance might just be $100. However, as you grow more comfortable and see decent results, you might end up increasing the size of your trades. Doing so allows you to have a bit more of a diversified approach, being able to allocate a certain portion of funds to trade without wiping out most of your account balance in one go.

It is vital that you only increase the stake sizes if it makes sense, and you are comfortable doing so. Otherwise, you can quickly find yourself falling into bad habits and tricky situations that might be difficult to get out of.

A good and solid broker will give you enough education and support so that you can feel confident to implement these key principles. One such broker is Forex4you, it provides ongoing support and educational resources. Happy trading!

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure