Every beginning trader wants to know how to trade Forex successfully. We are all concerned with how to enter and exit trades at a profit while controlling our risk.
One of the very first things that we have to keep in mind is that risk in Forex trading is very real. Proper risk control is one of the things which separate successful Forex traders from unsuccessful Forex traders. Let’s take a closer look at risk control and the role it plays in profitable Forex trading.
First let’s take a look at an example of improper risk control. Improper risk control is the results of taking a risk that is not reasonable for the amount of potential reward. If, for example, you risk $6,000 to make $200 you are taking an unusually large risk for the level of reward involved. Why is that? Well, if we take a quick look we can see that it would only take one loss of $6,000 to erase thirty $200 profits! Pros don’t trade like this and you shouldn’t either.
The moral of the above story is quite clearly, “control your risk at all times”.
Now, there’s more to successful Forex trading than just controlling your risk. We could all just control our risk by keeping our money in our mattress. Unfortunately we can’t grow our money in a zero-risk environment. This means that we need a method of growing our money; of getting some ROI (return on investment). All successful Forex traders have a strategy, system, or method that helps them achieve a positive return on investment.
By having a Forex trading system traders are able to systematically build their account equity over time. This systematic approach is the preferred equity-building approach for successful traders around the world.
A forex trading system is simply a set of predetermined rules designed to trades the markets profitably. Forex trading systems are an integral part of each Forex traders Forex trading plan. This plan is basically the same as any other business plan. The objective, of course, is to use your Forex trading plan like a roadmap to keep you on the course for trading success.
Another key to Forex trading success is maintaining your discipline. Maintaining your discipline sounds very simple in principle. You simply need to do what you need to do when you need to do it. In other words, you need to take the trades your Forex trading system tells you to take in the exact way your trading system tells you to take them.
While keeping your discipline sounds like something relatively trivial, it really can be quite a monumental task. That’s because making money is the objective of Forex trading and as we all know money is a very emotional issue. This is one of the reasons that many new traders have a difficult time making the transition from trading with a demo account and trading using a real-money account. Here’s a quick tip: If you trade your demo account in the same fashion as you will trade your real-money account you will actually do much better when you make the transition.
These are just of few of the things to keep in mind while trading. These successful trading tips have served profitable Forex traders well for many years.