6 Critical Factors for Successful Forex Trading
Online FX day trading has been popular across the world since early 2000s. Some investors have been very successful and boast of huge gains made in incredibly short periods of time. However, there are many others who experience devastating losses because they have not tapped into the 6 critical factors necessary for successful Forex trading.
Success in any profession can be broken down into a number of critical factors. Trading is no different. A successful currency trading strategy incorporates the following 6 factors:
- Determination of an edge: Trading the spot Forex market is a zero-sum game. There must be an identifiable edge over some other market participants.
- Disciplined execution: There is no point in identifying an edge if there is no discipline to follow through with your strategy. Create a plan, stick with it, then determine if the plan is successful. If it is not, change the plan. The important thing is the disciplined execution.
- Money management: If the risk per trade is too aggressive, then there is a high chance of blowing your account. If trades are too conservative, then you miss the opportunity to optimize your returns. It is critical to establish the maximum expected drawdown of any system and then set your money management rules accordingly.
- Create a trading plan: A trading plan will determine what will be done in any given situation during the lifetime of a trade. A plan helps keep yourself focused on execution and not get distracted.
- Responsibility: Responsibility lies with the trader. Gains, losses, success, or failure is determined by the skill, determination, and discipline of the trader.
- Commitment: There must be commitment to placing every trade according to the plan, even through the losing periods where every trade seems to end up in red. Trading seems to produces extremes of good times and bad times. One must not be overconfident during the good times, and one must not give up in the bad times. You must also dedicate a period to compare your actual performances to your trading plan. This should be done daily or weekly depending on the number of trades you make.
If you work on these six critical factors, your Forex trading performance will definitely improve!
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