The simple reality is that traders can never be 100% certain of what will happen in the market.
Forex & CFD traders don't have the gift of clairvoyance. Our first tip is, therefore, to always approach trading with probabilities in mind and to understand that no trade is a sure win.
This sort of fear often scares traders and makes them feel insecure, which could be as dangerous as overconfidence.
Have a Plan
Having a clear trading plan helps keep your head cool and focussed on making the most profitable decisions. As mentioned earlier, trading is not 100% predictable. Even with a trading plan, decision-making sometimes becomes messy in the heat of a trading battle. Mainly because Forex traders are humans and therefore tend to make emotional decisions on occasion.
Before we make any trading decision, we need to do a fast check of our to-do list before we make a trade. Trading without conducting pre-market analysis and preparations will be like driving on a motorway without checking your engine, or your brakes – it's highly inadvisable, to say the least!
Just as weapons and tanks are for soldiers, brokers and trading platforms are for traders. No matter how skilled a soldier is, if their equipment is substandard, all of their skills will just go down the drain. Similarly, no matter how good a trader is, without the right broker and the right trading platform, they will not be able to execute trades properly. These are some bullet points to help you choose your broker and trading platform:
- Do they give access to the financial instruments you have decided to trade with?
- How competitive are their spreads and commissions?
- What kind of trading vehicle can they provide you?
- How much is the leverage they can give you?
- What trading platform will they let you use? Does it have the features you need?
- How prompt and responsive is their customer support team?
- What is the kind of trading support they can offer you given your current trading capabilities?
Keeping It Real
- Do you believe that you can become one of the profitable traders?
- Do not ignore that... in my opinion, approximately 95% of traders fail to profit from the markets. Understand the cause of trader failure.
- Accept that trading success will take longer than planned, and it may cost more than you expect. How does this impact your plans?
- Are you realistic about expectations in learning what is required to trade, and the likely returns that are possible from trading?
Determine the Market
- Analyse your chosen market
- Work out the fundamental drivers of that market
- Is there enough volatility in order to achieve profit objectives?
- Determine if there is liquidity to allow entry and exit? If not, consider other markets.
- Is it a suitable time frame for your strategy? If not, consider selecting another market or time frame.
- Try and develop a strategy that offers versatility to exploit the market and produce profits when:
- The price is at Support or Resistance;
- There is a clear trend;
- During momentum swings;
- Gap plays;
- Reversal from extremes;
- There is enough volatility in the markets.
Know Your Boundaries
- What capital is required for trading your chosen market?
- What margin is required?
- What is the minimum position size and stop-loss as a percentage of capital?
- If the market is too volatile or the margins are too expensive, either continue studying while saving for more capital or consider a more suitable market that suits your available capital.
- Understand the advantages and disadvantages of leverage available in this market.
NB: Check our risk management section for more information.
Follow Your System and Price Action
- Where are Support & Resistance levels located?
- Locate supply and demand for a chosen market
- Are you looking to place an intraday position, swing, or scalp trade?
- Clearly define daily and weekly levels
Respect Your Own Rules and Pre-Determine
- Leverage per trade
- Risk per trade
- Risk per day
- Trade entry
- Trade management
- Trade exit
After you complete all the steps mentioned above, you need one more thing, which is patience. The market is like a shadow. If you run after it, you will never catch it. Stand still. Embrace it. You need to patiently wait for the market to come to you.
Always wait for the right moment and respect your trading strategy.
Another significant part of your trading is setting your trading goals. Doing so will help you keep your eyes on the prize. Having a clear set of goals will give you the capability to track all the developments in your performance as a trader. Try to set goals – including your progress plan – rather than just merely focussing on financial goals. By diverting your attention to enhancing your skill set as a trader, you also ensure your business success regarding the percentage of profitability of the trades you start to execute.
Furthermore, you have to decide how to accomplish and meet your set goals at the set time. The scale of your achievement can be measured by how much profit your trades can bring in. When you set goals, they have to be SMART – Specific, Measurable, Attainable, Relevant, and Trackable.
I hope that this will help you make a right trading decision.
Cheers and trade safe,