Many Forex traders enter the market in the hopes of replacing their income source. In spite of these hopes and dreams, consistently profiting from trading the Forex market takes time, patience, and a superhuman amount of tolerance for taking a psychological beating. To help you reach your financial goals, here are 5 ways to improve your income from forex trading.
Trading is not about quantity, but rather about the quality of trades you take. You can take 10 or 100 trades per month and still be further away from your financial goal than when you started. Trading less protects your capital from short-term market volatility and inescapable broker fees. However, this should not deter you from practicing short-term strategies, but make sure you are experienced and well-established enough to scalp or day trade responsibly and proficiently.
Develop Your Own Skill Set
It’s tempting not to copy the trades of other professional traders you see in message boards, forums, and trade-copying websites who are profitable and have already attracted a global following. Pay no attention to these famed investors and traders and instead develop your own skill set as a trader. This way, your success isn’t dependent on whether or not someone’s next prediction will be correct.
Manage Risk First, Profits Second
Among the 5 ways to improve your income from forex trading, risk management is unarguably the decisive factor for success. Be a risk manager first, and a trader second. This means only entering trades that have a high probability of winning and ignoring all others. A general rule of thumb is a 2:1 reward-to-risk ratio, implying that for every $1 risked, you stand to make $2.
Follow a Plan
Even if you are the world’s best quant or risk manager, you can only grow your capital so much without a well-designed trading plan. Create and follow a plan that details trades both from a macroscopic and microscopic level including stop loss, target profit, time frame, price levels where you can add to winning positions, etc. Supplement your plan with a trading journal, so that you can discuss the psychological events taking place as you manage trades.
Have a Pre-and Post-Trading Routine
What you do before and after you trade is as important as what you do during trading sessions. It affects your physical, mental, and psychological condition to trade. For example, if you haven’t slept adequately last night, you may experience difficulty in focusing on key technical and fundamental data as you trade. Though it sounds overused and unoriginal, taking care of yourself is an advice that literally pays for itself. Eat healthy, sleep well, and make sure to decompress after a long and stressful trading week.
These 5 tips will not only improve your income from Forex trading, but also let you build a career that is satisfying, enjoyable, and improves you as a person in all aspects of life. Your old self may have a hard time absorbing the changes brought upon by these guidelines, but it is definitely worth striving for.