Forex Trading Means Easy Money? Do as Suggested and You Can Make Decent Stable Income

As we have observed, there is a phenomenon with predictable pattern in the forex market: most novice traders usually make a profit when they first place an order in real trading. After this, they will have a symptom called "wizard trader". Out of complacency, they will start to hold positions for a long term, and don't pay any attention to profits or losses. At the end, most people will eventually lose money. Unwilling to accept such defeat, they will start to trade large positions and trade frequently. Then they gradually slip into "the inevitable stage" of becoming cynical about trading. As the year 2020 is right around the corner, Forexpress would like to share with you here a summary of the experiences of many senior traders. Regardless of the trading records in 2019, we have to make a fresh start and make steady headway forwards.

Caution: avoid getting wiped out

All traders are advised to have a thorough understanding of the risk of getting wiped out related to margin trading before trading forex.

First of all, let’s get to know the elements of a trading account, namely used margin, usable margin, balance, floating profit/loss and equity. Used margin is the collateral amount you set aside when enter a new position. The balance is the current total in the account. The floating profit/loss is the changing profit or loss that a trader has when holding an open position. Equity is the balance plus the floating profit/loss, and usable margin is the difference of the equity and the used margin.

When the account equity is lower than a certain percentage of the used margin, the system will close the investors’ positions automatically. Different platforms adopt different stop-out levels, investors should get themselves informed before they choose a platform and start to trade.

Don’t be obsessed with the perfect entry level

Many forex traders always want to catch the perfect entry level to maximize investment returns.

However, traders can only predict market moves and cannot be certain about them. If they get so obsessed with a certain point that they ignore the overall trend change, they may miss profitable opportunities, and even suffer losses.

Therefore, not getting obsessed with the perfect entry point is one of the forex trading skills that a trader should master. When the market is in a strong trend which goes in one direction, investors can follow the trend and make considerable profits as such trends mean huge profit margins;

If the market is in choppy consolidation, investors can look for the lows and highs of the ranges, buy the dips and sell the rallies to accumulate investment income. Although the perfect level or the best entry point can indeed bring more profits, one can hardly capture one. Therefore, we should pay more attention to the overall changes in the market moves, so as to choose a trading mode that is relatively more cost-effective.

Following the trend to harvest swing trading profits

 Under the influence of fundamental factors such as the economies of the related countries, geopolitical events, and global trade, the forex market may witness a strong trend that is irreversible in the short term. Trading strong trends promises huge profits and a lower lose rate. If a trader can ride a big trend, he can make decent swing trading profits. Generally speaking, medium and long-term trends can hardly be manipulated and they reflect strong objectiveness, so the focus of trend trading is to catch the trend-following swings.

To identify trends, we should use technical analysis tools focusing on price actions: the candle chart patterns, supports and resistances, moving averages, and other trend-tracking indicators such as MACD.

Reasonable control of trading positions

A senior trader once said that the two most important things about trading are the trend and position management. Appropriate position management can effectively reduce the extent to which leverage amplifies your losses.

When the market moves as expected, you can add positions as appropriate. If you are not certain about the market moves, you should try with small positions. In this way, we can maximize profits and minimize losses.

Take a break from your trading screen

With its T+0 and two-way trading model, the forex market allows traders to enter and exit at any time with its flexibility. However, if you are in a trading state for a pro-longed period, you will get exhausted, and end up making bad trading decisions.

When the market moves are hard to predict, it would be wise to conduct reviews, collect information about the market, and formulate trading strategies. Then when the price moves become clear we can enter the market again. Without excessive stress we can continue to make steady and profitable profits.

Beginners should open and close their positions on the same day

Forex market is open 24 hours a day, giving investors great flexibility. We recommend novice traders to avoid holding positions overnight. During the transition period between two trading days, with the market entering the settlement process, quotes rapidly decreases, the market tends to give way to sudden fluctuations, and trading can be rather risky; moreover, you will be charged a certain overnight fee for holding positions overnight, which will increase your costs.

Beginners, in particular, should open and close trades on the same day to avoid overnight risks and reduce expenses. If a position must be held overnight, the trader should be very certain about the market moves, he should also ensure that there is sufficient funds in the account to pay overnight fees and counteract the risks brought by unexpected fluctuations. What’s more, take-profit and stop-loss levels should be placed to protect investment interests.

When to exit is more important than when to entry

The forex market is volatile, and many investors are looking for appropriate entry opportunities. Whether it is a strong trend market or a consolidation market, as long as one captures the appropriate entry opportunities, one will have chance to generate good returns.

But in fact, the timing of the exit is more important than the timing of the entry. The former determines whether a trader makes profits or suffers losses. With wrong timing, you can not maximize the profits, you may even be unable to lock in existing floating profits, and you may even suffer losses.

A simple method to choose the exit time is to watch the fundamentals. If the prevailing environment has not changed significantly, you can continue to hold the positions. If new influencing factors emerge and there is a possibility of reversal, you must exit decisively to protect your best interests.

However, the market fluctuates from time to time. We cannot watch it all the time, so we can use a platform that allows pending orders to set the stop-loss and take-profit levels, thus effectively protect profits, limit losses, avoid slippage risks, improve risk control, and ensure stability of trading.

Disregard for the opinions of others not recommended

Some investors with good luck made huge profits accidentally. Then out of complacency, they believed that forex trading was very easy, and they started to trade capriciously without regard for the opinions of others. 

Over time, they became narrow-sighted about the market. Negative mentality may even push them to act like a gambler, leading to more and more losses.

If you want to make a profit trading forex, you must be open-minded, as it is important to learn from the outside world. Investors can also trade according to the analyst's advice, but they cannot follow such advice blindly. They should make some adjustments based on their own circumstances.

It is worth noting that investors must maintain a humble attitude when trading. They should avoid getting arrogant, and stay passionate about learning.

Identify the fluctuating patterns of the price actions

A strong trend in the forex market is usually irreversible in a short time and promises huge profit margins. Investors can follow the trend and harvest decent returns in a short period. But in fact, even non-trend moves have certain rules to follow. Get to know these rules and apply them when trading then you can also generate great incomes.

The forex market is a global marketplace that is open 24 hours on each trading day, but the market actions differ in different time periods. For example, in GMT+8 time zone, the market volatility is relatively flat in the morning and noon time, and in the evening, a lot of economic data is released, coupled with the sharp increase in the buying and selling power of the European and American markets, the market volatility will rise to the peak of the day, and there will be the most profitable opportunities.

Alternatively, traders can observe the market moves before and after the release of important events in the forex market, summarize the rules, and apply them when trading.

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