Five Good Forex Trading Habits

The secret of successful trading is to keep bad habits at bay and develop good ones. Here are five good forex trading habits that will help you on the road to success.

1. Be consistent

Successful traders take a structured approach: they formulate a strategy, test it and stick to it. Don’t be tempted to deviate from your strategy because you think you might be ‘missing out’ on a good trade. Remember, sticking to your proven trading strategy is what will bring results. 

2. Keep up to date

World news and events have marked effects on the forex market, so make reading the news part of your trading routine. As a first step familiarize yourself with the economic announcement schedules of the countries whose currencies you trade, as well as the implications of positive or negative results.  Before you place your trade, always check to see if there have been any overnight events that might affect market activity, and make sure you are aware of any pending announcements that might impact your currency pair.

3. Keep a journal

Even the most experienced forex traders are still learning how to trade forex, which means that from time to time they will need to update their trading plan. A good basis for updates is a trading journal. Keep a record of your winning and losing positions and then analyses your results later. This will help you look at your decision making process as objectively as possible. By keeping a journal, you can capitalize on your successes and avoid repeating your mistakes. Crucially, you can use what you learn from past trading activity to update and improve your trading strategy.

4. Be responsible

Even the most successful forex trader faces some losing trades. You can minimize the effects by being responsible at all times. There a number of ways to do this. First of all, determine how much you are prepared to lose – this will help you decide when to exit a failing trade. Responsible traders always placea stop loss on their trades. A stop loss is like a safety net – it will limit your loss and help you preserve your capital. Using a stop loss you can calculate ahead of time how much you stand to lose if the market moves against you. It’s also important to take full responsibility for your trading outcomes: remember, your results are based on your strategy and only inexperienced traders blame the market.

5. Make analysis your friend

Don’t let others sway you - before entering a forex trade, make sure you have studied the currency pair and the profit or loss scenarios that might lead to closing the trade. You can then build an exit strategy based on the possible consequences of closing. Above all, once you have defined your trading and exit strategies, stick to them.