In order to improve your forex trading skills, you need to realise and treat your trading like not a recreation activity, a business, or a casino. In other words, pay attention to every one of the interactions with the forex market, taking into consideration all of the possible costs to your trading business. View your interactions in the area of costs and revenue. Your goal would be to hold the costs down low to a minimum and the revenue as high as you can. In the forex trading business, this is done by managing the risk in an effective manner in order to reward on every single trade that you make.
To manage your risk and reward efficiently, you’ll have to use position sizing. This, along with risk to reward scenarios is how the good forex traders keep track of the trading business in an effective manner. Usually, a reward that’s at least two times the risk amount is what you should look for, but a reward of 3-4 times risk is even less desirable. Why? Because this way you can be sure that you’re using position sizing and risk to reward to effectively make your forex business grow on a monthly basis. You must learn to avoid over trading and to choose only high probability trade setups.
I wonder if this has been considered?
Good day trading systems have a stop loss and price target before you have even entered the position. This is great because you can work out your reward risk ratio. You should only trade positions which have at least 2:1 reward risk ratio. Anything lower and it will be frustrating to trade. Reward Risk ratio enables you to have greater chance of becoming profitable because when you’ve got a win it takes 2 losses to cancel the win if you use a reward risk ratio of 2:1 for each trade. Having a high reward and low risk ratio provides traders with a high reward and low risk trading system.
To further improve your forex trading skills, you will have to learn some simple price action based strategies and work on them. By doing so, you’ll learn what we’ve mentioned in the aforesaid paragraph, overtrading. You should demo trade for at least a few months until you start using real money in order to get some discretionary skill by taking only the most appropriate price action setups, for this reason.
Don’t forget about a trading plan, which is an essential component to treating the forex trading like a business. You probably know that any profitable business out there has a successful business model behind it. Probably, in forex trading it is all the more important to pre-define all elements of the interaction with other markets in comparison to other businesses. The reason behind such a situation is because only then you can make sure that you cannot fall victim to the emotion based on the forex trading mistakes like overleveraging or overtrading.
We recommend that you trade the forex you see and believe in and never doubt yourself or even worse, become a so-called ‘hindsight trader’ (not entering a trade because of regret or no other logical reason whatsoever). At first, you’ll probably make some mistakes but the key here is to learn from them and avoid repeating them in the future. The emotional aspects have an important role so you got to do your best to have every confidence in your actions in order to not get overwhelmed.