The forex market, which surpasses the stock and bond markets in terms of dollar amount of average daily activity, is the largest in the world. It provides traders with a variety of real advantages, including the biggest leverage accessible in any financial field and market activity every trading day.
Forex trading is frequently referred to as the final great investing frontier — the one market where a modest investor with a tiny amount of trading capital may realistically hope to make a fortune. It is, nevertheless, the most widely traded market by huge institutional investors, with billions of dollars in currency trades taking place every day that a bank is open somewhere in the world.
Here are some secrets to winning forex trading – top forex trading strategies to assist make your trading more profitable and your career as a trader more successful – to help you join the select few who regularly benefit from trading the forex market.
1. Keep an eye on the daily pivot points
If you’re a day trader, paying attention to daily pivot points is critical, but it’s equally critical if you’re a position trader, swing trader, or exclusively trade long-term time frames. Why? Because tens of thousands of other traders keep an eye on pivot levels.
Pivot trading might feel like a self-fulfilling prophesy at times. Markets will frequently find support or resistance, or market turns, near pivot levels simply because many traders will place orders at such levels since they are confirmed pivot traders.
As a result, when major trading moves occur off pivot levels, there is often no fundamental cause for the move other than the fact that a large number of traders have placed trades anticipating such a move.
We aren’t suggesting that pivot trading should be your main trading approach. Instead, regardless of your trading technique, you should monitor daily pivot points for signs of trend continuation or potential market reversals. Pivot points and the trading activity that occurs around them can be used as a confirming technical signal in conjunction with whichever trading method you choose.
2. Before you start trading, be sure you’re ready
Because the Forex market is extremely leveraged—up to 50 to 1—it can appeal to people in the same way that buying a lottery ticket does: there’s a chance of making a fortune. This, on the other hand, isn’t trade; it’s gambling, and the odds are stacked against you.
Preparing thoroughly is a better strategy to enter the Forex market. It’s a good idea to start with a practice account because it’s both helpful and risk-free.
Before you start trading, use the information you’ve gleaned from your reading to plan your trades. The more you adjust your plan, the more likely you are to get into difficulties, and the less likely you are to get that elusive forex profit.
3. Diversify your portfolio while limiting your risks
Two trading tactics that should be in any trader’s toolbox:
Diversification. Traders who execute a large number of minor trades, especially in markets with low correlation, have a better chance of making a profit. Putting all of your money into a single large trade is never a good idea.
Learn how to use a trailing stop to ensure a profit on an already profitable trade, as well as how to use stop and limit orders to restrict losses. The recommended books cover all of these tactics and more. Novice traders frequently make the mistake of focusing solely on how to win; understanding how to limit your losses is far more crucial.
4. Trade with a competitive advantage or edge
The most effective traders risk their money only when a market opportunity provides them with an advantage, something that raises the likelihood of the trade they make being successful.
Your edge can be anything, even something as basic as purchasing at a price level that has previously proved to be a strong support level for the market (or selling at a price level that has previously shown to be strong resistance).
A number of technical aspects can help you gain an advantage – and hence boost your chances of success. For example, if the 10-period, 50-period, and 100-period moving averages all converge at the same price level, it should provide significant support or resistance for a market, because traders who employ any one of those moving averages will be operating in concert.
Converging technical indications provide a similar advantage when numerous indicators on multiple time frames come together to provide support or resistance.
The price nearing the 50-period moving average on the 15-minute time frame at the same price level as the 10-period moving average on the hourly or 4-hour chart is an example of this.
Another example of many indicators working in your favor is when the price hits a defined support or resistance level, and then price movement at that level indicates a potential market reversal via a candlestick pattern like a pin bar or doji.
5. Keep your capital safe
Avoiding significant losses is more crucial than achieving large returns in forex trading. If you’re new to the market, that may not seem entirely correct, but it’s accurate nonetheless. Knowing how to maintain your capital is essential for successful FX trading.
Trading’s most crucial guideline is to play excellent defense. Why is it so vital to play good defense in forex trading, i.e., preserving your trading capital? The truth is that the majority of people who try their hand at forex trading fail because they run out of money and are unable to continue trading. They blow up their account before they even have a chance to enter a deal that turns out to be quite profitable.
The most important trading strategy is to limit your losses by avoiding overtrading or taking on too much risk in a single deal, safeguarding your investment funds.
6. Have patience
Forex traders, especially beginners, are prone to becoming nervous if a trade does not go their way right away, or if the trade goes into a small profit, and they want to pull the plug and walk away with a small profit that could have been a significant profit with little downside risk if risk reduction strategies were used properly.