Here weíre going to assume
you already have a methodology, or a Forex trading system
whose performance you are confident in - and you have the
necessary discipline to apply it correctly.
You can simply incorporate
the tips below into your existing Forex trading strategy, to
help increase overall profitability.
1. Accept Volatility
All successful Forex
trading systems incorporate volatility. You can't have a profitable
Forex trading method without taking calculated risks - and this also
means taking losses.
If you canít accept
risk, then donít get involved in currency trading. Many traders try
to restrict risk so much, that they actually create it Ė theyíre
simply stopped out all the time by normal volatility.
To make profits, the
secret is to take a risk at the right time - and risk meaningful
amounts of equity.
2. Trade Infrequently
One of the best ways
to make big gains in currency trading is to be patient - and wait
for the opportunities that offer the best risk to reward, to come
Many traders trade
frequently and always like to be in the market. Their logic is, ďif
Iím not trading, Iím missing somethingĒ Ė but theyíre wrong!
Focus only on the
trades that make the big gains (the longer term trends) - and these
donít come around every week.
correlation between how often you trade, and how much money youíll
make - so be patient, and trade infrequently.
3. Donít Diversify
Diversification is an
accepted wisdom - and weíve all heard the phrase, ďdonít put all
your eggs in one basketĒ - but it wonít make the average Forex
trader big profits. The average Forex trader is generally investing
small amounts of money - and diversifying simply dilutes gains.
If you see a trade
and it looks good, then risk as much as you can - and focus on that
one trade. If you believe in it, then back it with as much equity as
you can afford.
4. Have the courage
to Accept Big Gains
You hear a lot about
how important risk control is in any Forex trading strategy - but
having the courage to accept profits is just as important. Do you really need
courage to accept profits? Yes you do!
When a trader makes a
profit they get excited Ė and the bigger the profit becomes, the
more theyíre tempted to bank it. As volatility causes
dips in their open equity, the trader panics - and snatches a
marginal profit. In many cases however, if the trader had the
courage to hold the trade - they could have made a spectacular
Itís not a nice
feeling when your open equity is being eaten into by thousands of
dollars - but if you can hang on to the big trends, the end result
will be worth it. Many traders lose -
not because they were wrong in the direction of the market - they
just were stopped out by a volatile counter move, or snatched
profits too early.
5 Money Management
involves confronting risk and volatility cheerfully - and using
sound money management techniques. This enables you to deal with the
risks currency trading presents.
Here are some Forex
trading money management tips to keep in mind:
∑ Most traders start
to trail their stops to close, or snatch profits too quickly as we
have just seen - make sure you donít make this mistake. Keep your
stop in its original position - until the move is well in profit,
before moving your stop - to avoid being stopped out by normal
∑ If youíre trading a
small Forex account, donít diversify - concentrate on one trade, and
risk as much equity as you can.
∑ If you are
following the longer-term trends, donít exit a trade until your Forex signals tell you to do so. Have the discipline to hold on
To make big profits
in currency trading, you only need to focus on the best moves. Donít
be tempted to diversify too much - have the courage to hold on.
Also, use money management techniques that will control risk - and
at the same time, take into account the volatility that currency
trading presents. Currency trading
involves risk - and you need to confront it. Try to accept risk
cheerfully - rather than being fearful, as this will help you make
big gains in currency trading.
by Stephen Todd