People often tend to nurture a bunch of misconceptions and this is more than true when it comes to beginner forex traders. The saddest part about these newbie traders is that majority of their misconceptions are not only useless to their trade, but also the main reason behind their utter failures. So what is the right way to engage in forex trading, especially price action trading? Read on to know in complete detail:
Use Your Time Wisely
Too much of anything is bad and the earlier that newbie traders understand this concept, the better for them and their forex price action trading success. The usual trend among newbie traders is to spend long amounts of time online in scouring forex charts and trying to pick up a certain setup.
Their search does not end even in case they do not find any. Instead they will change the time frame on the charts and keep looking for something that is oftentimes not there at all.
Don’t Try to Create a Market
The market has a mind of its own and will behave exactly as it is destined to be, based on the existing financial climate. There is no point in trying to create a market to match the market of your expectations. No matter how long you stare at your computer or keep digging for a certain setup, if the markets are not favorable, you will simply have to accept that and let go.
Fix a certain time of the day / night for checking the charts and discipline yourself to stick to this time only and also ensure that this does not exceed more than half an hour per day. If you do not find your winning setup in this duration, just walk away and check back next day.
Friendship with Your Trading Journal
Consider your trading journal as your closest friend during price action trading and hold it as close to you as you can. Keeping records will not only include all of your trade parameters and trade records but also doubles up as a constant reminder to take your trading as seriously as you would for any other business. Being accountable to yourself is the first step in discipline and discipline is the first step to success in price action trading.
Actually designing a fine spreadsheet that is not only comfortable but also pleasant to behold is a great advantage. You definitely will be more likely to adhere to the disciplined price action trading approach instead of indulging in the losing emotional trade temptations.
Have a Trading Plan Ready to Use
You have no more than a few seconds to take a decision while engaging in active price action trading. Entering into an active trade session without having a tangible trading plan is like jumping into the center of a raging battle without a single weapon in hand.
Now a trading plan includes the previously mentioned point about strictly maintaining a trading journal. Other than that you essentially need to include a plan of action that you would follow on finding the ‘right’ setup in your daily price chart. This needs to be detailed to the minute points and must be referred to daily, until you master it.
A forex trading plan is the mighty weapon that helps to take off the pressure from your mind while you are actively engaging in price action trading, leaving it to act swiftly in the right direction without having to deal with the numerous risks of emotional trading.
Do Not Stretch Yourself Thin
Stretching yourself too thin is not going to bring you any success or benefit in forex price action trading. Instead of desperately trying to keep a tab on numerous currency pairs, it is in your best interests to have your attention devoted to just a few currency pairs. It is just a myth that you would be losing out on opportunities if you focus on just 3-5 currency pairs.
Once you gain experience in price action trading, you will start making consistent amounts of money each month even with 1 or 2 good setups each month.
Have a Pinpoint Focus
You must first understand and accept that having a pinpoint focus always promises to give you the better edge over others who have their brains scattered all over the place. There is literally no sense in trying to learn or master a whole lot of different setups. You only need to master one or two and you are set for life.
You need mastery rather than variety. Pick or choose a setup that looks easy to understand and apply. Once you have done this, make sure that you do not dive right into live price action trading. Instead of trying to apply your newly found knowledge on a live account, where you stand a risk of losing your hard earned money, take complete advantage of the demo platforms that almost all of the forex traders provide to newbies, entirely free of cost.
You must practice a lot and practice your favorite setup daily and consistently to the point that you are consistently making money on this setup on your demo account for at least the past three months or more. Once you reach this stage of perfection, it denotes that you can almost make money automatically like a robot. Only then should you take the risk of testing your skills on your live account.
Keep Your Eyes Wide Open
There are huge amounts of money to be earned in the forex market and the turnover is in the range of trillions of dollars. But that does not provide you with a license to fantasizing with your eyes closed. Forex trading is not a shortcut to a millionaire lifestyle because it is not gambling or casino, where you can make millions based on pure luck. Be practical and understand that forex trading is just like any other business that you would engage in and not a lottery ticket to your early retirement. Stay calm and keep your eyes and senses wide open and you should be fine.
Drill the fact into your mind and reasoning that you must not look at forex trading as a quick money making scheme. Your focus must be on the long term benefits and to stay in the game for a long time you need to be consistent and determined and practical.
Risk Management is Your Goal
Majority of the newbie forex traders jump into the game with the sole intention of minting money from the market and that is exactly why they fail utterly. Instead of making money your target, make risk management your goal.
Consider forex trading as a course in financial risk management. This is being emphasized to such an extent because the golden key to making money lies in fact in skillful financial risk management. Once you master this, then the monetary rewards will certainly start flowing in. Have a clear idea of the amount of money that you are willing to risk in losses. Also have a strong discipline regarding your trading plan and setups.