I started out trading the stock market about 20 years ago and then moved into Forex primarily due to the improved liquidity and leveraging options. Forex is high-risk; you can lose or win quickly and massively, hence the attraction. During my days trading stocks I was able to double my money, however due to the Internet Bubble in 2000 I lost it all and decided to step away from it and instead look into Forex. My time on Forex did not go very well and I unfortunately had to step away from it completely.
Fast-forward about 20 years and now I am back in Forex for about 1.5 years, after trading demo accounts for about 6 months, and doing much better at it. I cannot reveal my strategy in detail, although it is similar to scalping, but I can share some tips and rules I personally abide by that work very effectively and hopefully will help others out there.
Avoid Major Economic Events
Major economic events can move the market up or down rapidly and unless you have insider information on where it is going to go it is best to avoid them completely and wait to trade the rebound as they often get retraced at some point in time.
Discipline and Patience
Once you form a strategy you must be disciplined and trade it like a project. As the saying goes: “Plan the Trade, Trade the Plan”. Patience is also a key factor since you often have to wait until the market moves in your favor; this could take hours to days depending on your trading strategy.
No Mistakes and No Predictions
Be mindful of your trading strategy and avoid making mistakes that may cost you money; this can be as simple as keeping a log book to see how well you have done in the past and what challenges you faced and how you overcame them. Avoid making predictions as the market is driven by the banks and sentiment; do not try to predict it. Instead use technicals and fundamentals to guide your decision making to avoid predictions.
Avoid Being Emotional
You cannot control the market so do not let it control you. You need to use sound logic and reason for your trades and stick to that completely. An emotional trade can easily become a losing trade; so be mindful of your emotions and do not let them control you.
Avoid Weekend Carryovers
Weekend carryover trades are risky because anything can happen economically, politically etc. over the weekend that can rapidly move your trade in the wrong direction. Keep your positions closed over the weekend to avoid big unexpected swings.
Stop Losses and Take Profits
Always have a stop loss and take profit point for your trade before you enter it. This will help you manage your money better and ensure you protect yourself from market swings going against the direction of your trade. Refer to technical analysis to determine where your stop loss and take profit points should be. Stop losses are your friend.
Avoid Trading Before, During and After Major Economic Announcements
The market is usually flat before a major announcement and when it goes sideways you could lose money. During the announcement expect it to move rapidly and massively; so best to stay away. After an economic announcement things can get a little jittery so be patient and wait until the market stabilizes and returns to normal so you can trade your plans.
Avoid Make-It-Back Trades
If you have a losing trade avoid getting tempted to make the money back; this is an emotional maneuver and can lead to further losses. Instead, optimize your trading and continue to plan your trades and trade them as you normally would.
Trade a Demo Account
You have not learned anything until you have traded on a demo account for a few weeks or months before live trading. Take the time to study the market, take risks and see how your plans work in a demo account; they are free and offer a great opportunity to learn. Once you are live trading make it a habit to trade a demo account during your non-trading times to continue your learning objectives.
Wait Like a Lion, Watch Like an Eagle, Bite Like a Snake
This goes back to the fact about being patient but also gives you guidance on how you should behave and face trading. Lions are patient, eagles watch closely and snakes move fast and efficiently.
Support and Resistance Are Your Friends
For whatever time setting you use on a chart look out for key support and resistance points to guide your trades and set the correct entry and exit points. Sometimes in Forex these support and resistance levels can be “fuzzy” and imperfect, however they do exist and can help you greatly in timing the market for the right trade.
Leverage Economic Calendars
Your one stop site for economic calendar events should be EconoCal. Consider subscribing and make use of it… Especially if you are a fundamental investor or trader.
Bank Holidays and Global Crises
Avoid trading on bank holidays since the market will likely be flat and go sideways and not in your favor. The same goes for global crises like wars etc.; be cautious when trading during these times.
Lastly, make sure you are using good tools for trading like MetaTrader and TradingView; they can be your best friends as a trader. Avoid robots; I have had no success with them. Remember to keep a log book or diary and reflect on your trading habits and prior trades to keep yourself mindful of how you trade and what you can do to improve.
All the best to you in your trading journey and make sure to look out for my future book on the this topic that will have all the above points plus many more!