Forex or foreign exchange market is the largest international financial market in the world. Today, it is the most liquid and popular market, thanks to retail brokers that allow us to place buy and sell orders in the foreign exchange market.
Although it is within everyone's reach, it is highly advisable to undergo prior training to avoid losses resulting from inexperience or the leverage allowed by operating in this market.
For this prestigious trainer in the foreign exchange market, these are the keys to consider when operating in the market:
1. Don't have false expectations
It is worth noting that creating false expectations about the returns we expect to obtain from our capital can become the number one cause of failure in our trading.
Obtaining a return of around 20% is a very coherent annual target compared to returns of 80, 100% that are promised in certain places.
Precisely, if we have such high objectives of, for example, 80% depending on our strategy, the risk-reward ratio may also be this. Therefore, we must take into account the following loss table to know the necessary gain to recover the initial loss.
Any trading manager who has been in the market for years will adjust to even lower returns than those I mentioned before, such as 10%.
2. Know what a financial market is
Behind this market we have dealers, banks, institutional traders, professional traders and all of this in the most liquid financial market in the world.
Training is a key aspect to understand the financial market and of course also in the forex market. We never stop learning and it is always good to know other points of view.
3. Control Emotions
Fear and greed will be our travel companions. These emotions are heightened when we operate in real, so it is advisable to operate in demo at the beginning. Although not for an excessive amount of time, since doing it this way we will not feel the emotions that will later come when operating in real mode. One of the advantages of the forex market is that we can operate with micro lots and accounts of a very small size until we reach consistency in our forex trading.
How do we combat these "enemies"?
Although we may become veteran traders, these feelings never disappear and we have certain weapons such as sports, yoga, relaxation exercises that will help us with our day-to-day trading. They will make us feel better and live with our emotions in a healthier and more balanced way.
4. Discipline
We are going to look for thousands of excuses not to be disciplined, but if we want to execute our strategy correctly we will have to be disciplined. It is one of the most important points and depends exclusively on oneself. For example, we cannot be operating one day on EUR/USD and the next day switch to commodities or stock indices without acquiring a habit in our way of operating.
This discipline should not only be applied to trading but to our life. Someone who is not able to get up every day at the same time to operate will not become disciplined in their trading.
5. Leverage
Leverage in forex is good and necessary, but you have to know how to use it in its proper measure. You have to understand what the minimum unit of movement is (known as pip) and its correlation with the contracts to be used, so with 1k we will obtain 0.1$ per pip and with a standard lot 10$ per pip.
We can find brokers that allow us an exorbitant leverage but the important thing is to know how to manage it so that it does not ruin our account in a few operations.
6. We need a plan.
In trading, as in any business, we need a plan. It is very important to have it in writing, including the key points on which we are going to rely when carrying out our trading, so as not to skip the rules every day.
Our plan can be a long-term trading or swing trading in which we take advantage of the trends offered by the market, or an intraday trading in which we are going to look for smaller routes than in swing trading but much easier statistically to achieve.
A book that I recommend and helped me a lot to change my perception of the way I operate is "FOREX STRATEGY TEN" by Rob Booker.
7. Monetary management
We need an economic management that helps us to achieve our objectives throughout the year. It is something that I link to the psychology of trading and that I call The 40 Steps to Heaven, as my trading school students know well, which will help to achieve your trading objectives in a less stressful way.
8. Backtesting
You have to test the plan, we need experience that we will obtain not only by operating live but also by doing thousands of bars of backtesting.
It will make us gain confidence in our strategy if it is a winning one and to stop operating it if on the contrary it is not.
9. Trading diary
Having a trading diary will make us remember what we have done so that in the future we can review it again and learn from our mistakes but also learn from what we have done well. This will help us especially in the moments when we have several losses in a row and we look back to see if we have modified something in our way of operating, if the market conditions have changed, etc.
10. Schedules
The forex market is a market open 24 hours a day from Sunday night to Friday afternoon. We have to get used to having trading schedules and know how to segment them in the different sessions, the hours of news releases, etc. so that we are not surprised by the movements of the market. For example, we do not have the same movement in the Asian session as in the European opening.
To improve in our Trading we need to learn from our mistakes, but also from what we have done well?
