what is forex: what is forex

what is forex

Trading in the foreign exchange market is not based on any rocket science as there is no such thing called holy-grail in it. There are numerous things in it that you learn by the time and whatever you know today about it; chances are that after a few months you would think how less you knew before. Optimizing the number of green trades in your account can only be possible by your experiential learning; had reading the books were the only key to profitable trading then almost all of us would be rich within no time.

However, if you don’t have enough expertise then you could at least learn from other traders experience and the tactics they followed that didn’t work out. Let’s have a look at some of key lessons that would certainly help you out in maintaining trading discipline and optimize profits.
1 – Control your Emotions

Never let them interfere while you are trading. Greed and fear both are detrimental as having greed for more profits usually ends up in losing the already-earned money. Fear of losing your trades compels the trader to close the position at loss and he does so too, and soon after that he realizes that the market has started moving in his favorable direction. Therefore, the market always supports those who keep calm, are patient with their trades, and avoid getting overwhelmed by unfavorable market movement.

2 – Say No to Overtrading


Once the trader has incurred loss in previous trades, he thinks to cover that loss up and enters the market again thinking that he would cover it up easily. But unfortunately, he keeps on losing more as the positions entered were based on emotions rather than rationale. This really brings his confidence level down and his fear increases due to which he often fails to enter in the market when the direction is clear. So opportunity cost doesn’t let his account grow.
3 – Trading Style & Session

Trading styles differ among traders, depending on their time feasibility and ease with which they can trade. However, most traders prefer trading in the European or U.S session as the market usually does not have choppiness in it and has 80% probability to move in one single direction.

4 – Closing the Trades


The fundamentals including the speech or conferences by the policymakers have been reflecting a deep impact on the market, so it is highly recommended for the traders to close their positions before such events as the technical points normally fail because of high volatility. Plus, don’t forget to close your trades on Friday before the market closes for weekend because you never know what news or decisions might come up by the policymakers on weekend, due to which the market may open in huge gaps.

5 – Trend is your Friend


Breakouts occur both in the bearish and as well as in the bullish trend, but that doesn’t mean you try to make the most out of the market and enter the market ‘against’ the trend to get each and every pip in your favor. Always follow the trend; for instance in a bullish market when you see a bearish breakout, selling is not a good idea rather you should buy more on the dips. The same is true for the bearish trend, where selling on bounces may optimize your profits too.

To identify the trend, follow the 200 EMA on daily, four-hour, and one-hour chart where the price moving above the EMA line represents a bullish trend, whereas price movement falling below that line means the trend is bearish.

6 – Adding to your Positions


Once you are done with identifying the trend and breakout, do not enter with a huge lot at that very same price, instead enter small lots repeatedly if the price is moving in your favorable direction. This decreases the risk to a great extent and makes sure that you are getting profits on each trade you enter one after the other. For instance, if you went long on EUR/USD, enter you buy positions after every 5 to 10 pips gap from the initial one, if the price is continuously moving upwards.

If you are new to trading, playing it safe is what you need to focus on along with building up your confidence and balance because once it’s lost at the beginning then you might end up quitting forex trading as it may seem to you as a futile thing.

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