By Admiral Markets
How many of you are still searching for a Holy Grail?
Sound like a familiar question?
It should do because I have already asked it several times and I will repeat the answer again too.
You are the holy grail.
Because there are some essential and generic skills that can boost your Forex trading.
Read on to:
- find out what essential trading skills you
- identify your strengths
- improve your existing skillset.
Learn to read price action
This is one of the most important trading skills.
It is the main indicator because it is the one seen by every trader – including banks, institutions and hedge fund traders.
Plus no matter what indicator any trader uses, they are almost all looking at charts with Japanese candlesticks and bar charts – maybe even Heiken ashi.
So if you learn to read price action, you'll see the most important common element across most trading systems.
And if everyone else can see price:
…and wants it to go in a certain direction…
…the odds increase that the price will be pushed in that direction.
It happens because the majority of traders look at the same picture and therefore help the price move in a desired direction.
Want to know more about price action?
Patience is a virtue
This is a skill that is not talked about very much in the trading world – except by those who actually make money from trading of course.
Having patience sounds simple enough, but in practice it is rather difficult.
You might be wondering why?
Well, that's relative to the common motivations for trading including to:
- make money
- trade until our last breath because it's our passion
- a combination of both.
And in all these scenarios, our natural inclination is to trade as frequently as possible.
However, in the trading world:
…quality beats quantity when it comes to overall profitability…
…and learning when not to take a trade is critical to your trading quality.
So rather than simply taking trades because your system says too, or because you have a gut feeling that the trade will go your way – learn patience.
Patience will help you judge when it's time to make the right trade.
Respect trading sessions
There are three major trading sessions – Europe, New York and Tokyo.
Each session has its own rules and a different combo of positives plus negatives in a variety of aspects.
But they all have one thing in common too.
Namely, the first three hours of each session are the most profitable.
Additionally, you should not always trade the same pairs.
Rest assured that AUD/JPY is much better to trade during Tokyo session than EUR/USD.
Learn each session's:
- normal movement plus volatility; and
- which pairs provide the best movement during each one.
Correct risk management
- never want to risk more than 1% of your account on any one trade; and
- want to keep the daily risk limit to 3%.
As soon as you cross 5% of your risk limit, you are in the danger zone.
But the good news is that how much you risk, is entirely up to you.
Choose an amount that you're completely comfortable losing.
Remember – you should focus on how much you are willing to lose, not how much you want to get from a trade.
When you use good risk management, the odds are significantly higher that you'll get what you want from your trading.
Proper trade management
This is one of the skills I have been working on since I started to trade.
You should try managing your positions diligently and without emotion.
A big factor in increasing your return and preserving your capital may be:
…going against your natural instincts by cutting your losses fast…
…and letting your winners ride.
Other vital trade management ingredients include:
- understanding strong vs. weak currency pairs and relative trends
- looking for accurate entry points
- placing correct stop-loss
- locking-in profits.
Sounds easy right?
Nah – personal experience informs that it's a hard thing to master.
But once you master it, you will see a huge boost to your profits.
Master different pairs
As I touched on above, understanding currency pairs is vital – not just one currency pair.
I have heard many times of professional EUR/USD traders and master GBP/USD analysts.
These titles are nonsense.
There is no such a thing as a pro or master of one currency.
Learning technical and fundamental facts about each of the currency pairs, can keep you in business.
My profits skyrocketed when I started to work on 25 different pairs.
So take time to understand the differences between each currency pair.
I.e. each pair represents a different combination of countries with corresponding economies, trade balance, interest rates and other factors that cause a currency flow.
I recommend sticking to a small number of pairs to start with, then expanding to others once you've mastered those first few.
Simply put, know the markets you choose to trade in and you will be rewarded with less surprises.
I hope this post pointed you toward some important things, that you might have not been paying attention too beforehand.
If you have any questions or comments, feel free to put them below.
Cheers and safe trading,
Admiral Markets is a leading online provider, offering trading with Forex and CFDs on stocks, indices, precious metals and energy.
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