Indeed, there’s no one-size-fits-all trading formula to
succeed in trading in any financial markets. Diving into the world of trading
is very much like swimming. It requires skill, patience, proper equipment, and
presence of mind. There are things that you should do to prepare before beating
the odds in trading.
To beat the forex market, you need good analysis paired with
effective execution. You’d be surprised at how much your success rate will
improve. And just like many other skill sets, successful trading comes from a
mixture of talent and hard work.
Here are the top things you should do to prepare yourself
for forex trading.
Preparation for Forex Trading
Before you really take the plunge, you have to bow down to
the first key to success: preparation. It’s important that you align your
personal goals and temperament with relatable instruments and markets. For instance,
if you are well-versed in retail market, it’s natural for you to trade retail
stocks instead of oil futures. To help you get this rolling, consider the
following components:
Timeframe
The timeframe tells the type of trading that’s fine for your
temperament. Trading off a five-minute chart suggest that you’re better off
taking a position without exposing yourself to overnight risks. Meanwhile,
choosing weekly charts suggests a comfort with overnight risks as well as willingness
to see some days go against your position.
Additionally, you got to decide if you really have the time
and willingness to go tete-a-tete with a screens all day or if you would rather
do your research over the weekend and then make a trading decision for the week
ahead based on your analysis.
Keep in mind that the opportunity to make substantial money
in the forex markets needs time. Short-term scalping basically means small profits
or losses, meaning you’d have to trade more often.
Methodology
Once you choose timeframe, find a consistent methodology. For
instance, some traders prefer to buy support and then sell resistance. Others would
rather buy and sell at breakouts. Other groups
choose to use indicators such as MACD (moving average convergence and
divergence) and crossovers.
Once you pick a methodology, you have to test it and see if
it works on a consistent basis and provides an edge. If your system is
dependable for more than half the time, you should consider than an edge,
albeit a small one.
It’s also a good idea to backtest your system and discover
every time trading on a signal and your profits were more than your losses. Bear
in mind, however, that this method isn’t an entirely reliable indicator for
future success. Test some strategies and
when you find the one that delivers consistently positive outcome, stay with it
and test it with a variety of instruments and various timeframes.
Market Instruments
You will eventually find that certain instruments trade much
more orderly than others. Fluctuating trading instruments make it difficult to
come up with a winning system. Therefore, you ought to test your system on
multiple instrument to find that your system matches with the instrument being traded.
For instance, if you were trading the USD/JPY pair in the
forex market, you may determine that the Fibonacci support and resistance
levels are dependable.
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