Successful trading is the dream of every investor and trader. There is always a misconception that successful trading involves not having losing trades, but any profitable trader will know that success in the markets is having more overall profits than losses. In the uncertain world of financial assets trading, losses are almost inevitable. But success is certainly achievable.
Here are a few tips to help you realise your trading goals and ambitions:
There are many ways to limit losses when trading forex and other financial assets, but the most important one is definitely an education. Financial markets are fast, dynamic and change by the day. It is therefore important to commit to continuous self-education to have a realistic chance of success in a market where profit opportunities are unlimited.
Improve your Technical Analysis Skills
The motive for technical analysis is to pick out optimal entry and exit price points in the market for maximum profitability. It is important to master all facets of technical analysis so that you can put the prevailing price action into perspective and apply the appropriate trading strategy in all market conditions. The most important aspects to master include the application of different types of charts (tick, line and candlestick charts), graphical analysis methods, as well as different types of mathematical indicators (trend-following, volatility, oscillators and volume indicators). Ultimately, technical analysis will help you understand buyer and seller behaviour in the markets, and you will then more often trade with the winning group.
Incorporate Fundamental Analysis Methods
While technical analysis focuses on HOW price moves, fundamental analysis seeks to establish the WHY. Fundamental analysis will explain the forces behind the current and potential future movements in the market. Various economic, social and political factors influence the price movement of various financial assets. It is important to track these factors so as never to be caught out by random price spikes that can lead to catastrophic losses.
That said, you do not need a PhD in Economics to perform comprehensive fundamental analysis in the market. But a must-have tool for fundamental analysis is the Economic Calendar, which is usually available for free online. By using the tool, investors can track the release of major news and events that may have an impact on the prices of their favourite financial assets. Some of the most important pieces of news and events to keep track of include Interest Rates of Central Banks, major political events such as Elections and Referendums and Individual Company Reports when trading stocks.
Investing knowledge and skills can make you a competent trader, but not necessarily a successful one. The investing arena is always likened to a wild jungle; there is plenty of juicy prey, but even the most skilled hunter can get killed and lose it all. When trading forex, real money can be made, but real money is also at stake.
Regardless of competence levels, an investor is always their own worst enemy when trading the markets because of their emotions. It is therefore important to develop a great deal of discipline, patience and self-control when trading so as to avoid psychological traps in the market such as fear, greed, overconfidence, bias, anchoring and even the gambler’s fallacy. As a human, you can never avoid emotions, but you can learn about your personality and control your emotions, so they do not interfere with objective trading activities. One of the most effective ways to achieve this is by having a trading plan.
Have a Trading Plan
Trading is not gambling; it is a business and should always be treated as one. It is therefore important to have a trading plan, which will detail how you will conduct your overall trading activity at all times. An important tool in your trading plan is the trading log, which will not only help you keep a record of your trades but will also track your trading performance. A trading log is like your trading diary and it should capture your market views, performance statistics, trading mistakes, missed opportunities and even your motivation for trading. This will help you validate your trading strategy, enhance your technique, and improve your overall market psychology. If you plan your trades and trade your plan, you will no doubt improve your odds of success in the market.
One last aspect we haven’t talked about yet is the importance of choosing a right broker. This is your hard-earned money we’re talking about here, after all, so being safe and sure about the integrity of your broker is crucial. As Canadian traders you’d probably be more safe dealing with locally-regulated Canadian forex brokers rather with some unknown unregulated company that can vanish along with your funds one day.
Realising investing success is not a far-fetched dream. The above tips (if followed) can greatly enhance your chances for success in the financial markets.