Five Tips for Better Trading
It's a fact that only 25 to 30% of online traders make money. It's a lesser-known fact that most traders are right, most of the time. That is, they make more successful trades than not. So why are three-fourths of online forex traders losing on their investments?
The reasons are complex, but can be summed up easily: They lose more on their unsuccessful trades than they earn on their successful trades. Here are some simple tips you can follow, to avoid some common mistakes.
Make sure you do your homework before you start trading. The most successful traders are those who have taken the time to learn how the markets work and how to trade strategically, before they put a single dollar into a trade. Good traders know that forex homework isn't just learning how to work a trading platform; they also know to watch the political and economic news that affect the currencies they like. They also know that the homework is an ongoing endeavor, and keep up with the news as conditions change and markets react.
Learn from successful traders
The best traders know that it takes time to learn how any particular trading platform works. They will look for ways to practice trading before putting real money into live markets, and take the time to learn how their trading platform's interface is set up – what do the charts look like, how to place trades, how to set trading limits, and so on.
At CM Trading, traders can use the CopyKat social trading platform to seek out successful traders, analyze their trading activity, follow their trades over time, and even copy their trading transactions. The CopyKat system is a great, hands-on way to learn how the market works. Its strongest benefit is that it lets a trader see successful trading strategies in action, before putting real money down.
Start smart with your real trading
Experienced traders know how to adapt to the ever-changing conditions of the forex market. Until you gain that experience, it's best to keep your trades modest. Experts recommend two complementary strategies.
First, build a diverse portfolio. If you like US dollars, trade in them, but don't put all of your investment in dollars. Make some of your trades in Euros, yen, Swiss francs, or even gold. This will help to shield you if one trade shows a sudden loss; chances are, the other instruments in your portfolio will compensate.
Second, cap your trades at about 10% of your account equity for each instrument. It's a proportion that won't hurt your trading should you lose it, and it will grow quickly when your trades are successful.
Be patient in your trading, and don't expect your portfolio to profit overnight.
Don’t chase a loss
We all like to be right, and when we see a trade go wrong it's tempting to let it keep going until it turns back in our direction. This is a common mistake that can be avoided by simply placing a stop-loss in every trade.
Most platforms will let you set a stop-loss limit when you open a trade. Use that option! It's an automatic feature, and it is your friend.
You can always ask your broker for the technical analysis and other tools you'll need to determine where to set a stop-loss. The results of the analysis are different for every forex currency pair. As you gain experience, you'll learn how to set wise stop-losses.
Let your wins run
There's a flip side to not chasing losses, and that's just letting your winning trades run. Again, everyone likes to be right, and when a trade goes well it's tempting to cheer and cash it out to take your earnings while you're ahead.
As with losses, technical analysis is your friend. Knowing how to analyze a currency pair and interpret the trends tell traders when and where to set a take profit on each trade, to maximize earnings while minimizing risk.
There is no guarantee in online trading, but you can trade intelligently and strategically in the forex markets. These five tips will help set you on that path. Remember – most traders are right, most of the time.
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HIGH RISK WARNING:
Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.
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