Trading cannot always be profitable. No financial markets, including the forex market, are sure shot accurately. But as they say, try and try and you will win. Here winning means being a little more accurate forex trader than already are.
Accurate forex trader implies the possibility of a trader to have as high as it is the possible trading ratio as the number of correct predictions to the total number of input trades when the risk-reward relationship is immutable. Humans tend to find solutions to their problems, and that has been true in the case of forex trading. With the best practices, a forex trader can increase the chances of profit and reduce the chances of losses. These tactics are as simple as being aware, disciplined, and prepared for the forex market. Implementing constant awareness in trading can, for sure, lead to better accuracy forex trading. Traders need to learn to analyze mistakes if they want to improve accuracy.
How forex trader can improve accuracy?
For example, trader creates a strategy where he can buy and sell some forex pair using some rules. Trader risks $10 and tries to reach $10 target. When the trader tested strategy his winning ratio was 49% for an example (risk: reward is 1:1). Then using a trading history plan or some machine learning algorithm, a trader can create a better model, change rules, add an additional rule. Just one filter (new trading rule for example to buy only above EMA200 or SMA10, or etc.) can improve accuracy and now it is 52%. This is huge improvement and now strategy can be profitable.
Tips How to Become an Accurate Forex Trader:
1. Take It Easy
Things, even in ordinary life, get ruined if you take impulsive decisions. The same thing applies to forex trading. Be easy when trading in forex.
The forex market is highly leveraged as much as the typical leverage scenario looks like 50:1 or 100:1. It means if you have $1 in your forex trading account (it is just a hypothetical example), you will get to trade forex worth $100. That is insane, right? In some cases, the leverage is as much as 200:1. The profit using leverage is gigantic, but it also comes with the downside risk of being wiped out from the forex market within seconds if the trade goes in the opposite direction.
Forex trading is different from stock market trading. In forex trading after getting done with the questionnaire on trading goals, if you have a debit card and an identification card, you can have margin trading unlike the stock market as in the stock market, you need to have real money in your trading account. Thus, it’s easier for more people to trade in the forex market.
Easy access often makes novice traders enter the market with the hope that they would make easy and quick money. The attraction here can be compared to a lottery ticket that people buy as their financial remedies. Most of the lottery buyers feel that they are going to win the lottery and get rich in a few days. But what they forget is the fact that only one in a hundred million has the odd chance to win the lottery.
The same thing happens when new traders enter the market. They forget that the forex market is not a lottery; it would require more than just a chance. There has to be enough knowledge, skills, and patience to win profitable trades, and that doesn’t come by just gambling.
Thus, the best practice you can opt for while starting the forex trading is to go in easy. You must have a limit on how much you should trade initially. In addition to that, never trade without a stop loss. Stick to what is your reward to risk ratio and how much you can afford to lose in a day. If you abide by your own rules and apply your skills, eventually, you would earn well. But never trade as if you are gambling – this is the bottom line for being an accurate forex trader.
2. Be Prepared for Your Trade
One has to be prepared in life for the endeavors that he/she is aiming for. So, to be an accurate forex trader, you are advised to be fully prepared before you begin trading. No one wants to be an average trader, right? In forex, average trading means being one of the 2/3 forex traders who lose money. Many times forex traders even lose their capital money, which results in high debts. Also, average forex traders tend to give up trading within four months. No one wants either of these, correct?
The best way you can avoid these consequences is to make yourself educated with forex trading and try trading on a practice forex account.
You have to read as much as you can and keep yourself updated with the current news and learn the technicalities of the forex market. You can do these by reading financial newspapers, watching educational videos, or going through research papers. You may have to invest time, but that would be the best trade you would take in your life.
As stated above, you can also start to learn trading through a practice forex trading account. Most of the U.S. forex brokerage houses provide these accounts without charging fees. So, make the most of it. Take a pen and paper and make a note of your trades and your mistakes. Trade journaling is useful. It will help you keep track of your trading directions. Your initial trades would not be profitable, but that’s totally fine, as that is how it is supposed to be when you are learning. And that’s the reason that you should do it on a practice account, so you do not lose real money.
3. Be a Disciplined Trader
The foremost thing to be an accurate forex trader is to be disciplined. You must decide your losing capacity, place stop loss according, and do not deviate from it at any cost. Also, do all these things before you start your trade. Even if you think you can gain more profit, don’t trade as greed is a poisonous thing, and you may end up losing more than what you have won till now. Stick to your trading plan, as without a trading plan, trading is just mere gambling. You can’t expect to win if you can’t follow your own rules.
Don’t Fall for Scam Traps
This doesn’t seem that major of standard practice, but it is very crucial. In greed, we tend to do things we won’t do otherwise. There are people out there to take advantage of your greed by selling you “guaranteed results” and “get your money doubled” kind of schemes.
Thus, choose only a credible broker; cheap can actually cost you a lot more in the case of forex trading. You can also check the credibility or the status of a broker from the National Futures Association (NFA) in the case of the United States. If your potential broker is not in the record list, it is a big red flag. Remember, in the end, as much as you educate yourself and as much time you invest in forex trading, the more accurate forex trader you will become with the passing time.