3 Key Components To Successful Forex Trading
When trading in the financial markets you must proceed with extreme caution. One wrong move and you can literally wipe out everything you have worked so hard for. That’s why knowing some excellent forex trading approaches to start off with is so important. By knowing some excellent forex trading approaches you put yourself in a position to win with every trade.
Prepare In Advance
The value of proper preparation cannot and should not be underestimated. The first and most important thing you should do is make sure your personal goals and temperament are properly aligned. You have to look at both the markets and the instruments available to you to see what will work best.
How you approach the market is what will ultimately determine your success or failure. Here are 3 key components you should assess when looking at how you should approach the market:
1- Time Frame
Time frame is directly linked to your temperament. It will indicate the type of trading that is right for you. If you would prefer to avoid overnight risk, trading off a five minute chart may be the best option for you. If on the other hand you are okay with overnight risk, consider using weekly charts for your trading.
Once you have figured out your time frame, the next step is to find a consistent methodology. The methodology you choose will depend on how you like to trade. For example, some traders prefer to buy or sell breakouts. Others may prefer to sell support and buy resistance.
Once you find a system or methodology that works for you, test it to ensure it will produce results on a consistent basis. The goal is to give yourself some sort of an edge. If your methodology works 50% of the time, stick with it.
Overtime you will discover which instruments trade better than others. Avoid erratic trading instruments as they will not produce a winning system. Your best bet is to use multiple instruments to test your system. This will allow you to quickly pinpoint which instruments match the personality of your system.
You should also take the time to test multiple time frames. Depending on what you are trading, there will be certain time frames that will work better with your system.
And there you have it, 3 very important components you should look at before approaching the market. Keep in mind there is no right or wrong way to trade. The goal is to never lose money and your system should be built around that premise.