By: Johnathon Fox
For many traders long gone are the hopes of making millions of dollars over night, and all they wish to do is stop losing money and begin to turn their trading accounts around. There are many mistakes that traders make that contribute to getting themselves into this situation, and this article is going to cover the top 5 things traders can do to turn their accounts and performance around!
Pick a Trading Method and Perfect it
Traders that come to Forex in most cases are looking to make a lot of money and very fast! To achieve this they begin to chase the “Holy Grail” that will make them all their riches. Instead of looking for a method that will give them gradual success, they search for the latest fancy indicator that will do all the work for them. I am here to tell you that we all would be rich if this was possible!
If you are serious about making money in the Forex markets it is time you get rid of this mentality and settle in to learning a method that you can use for the long term.
One method that can be used to trade the markets successfully is Price Action trading. Price Action trading has been around for a long time and it will be around for a long time to come. Price Action trading will not stop working every time the market dynamics change.
Price Action trading involves traders learning to read the raw price on a chart, and focussing on high probability Price Action patterns that repeat themselves. Price Action is a very simple method that most traders can get their head around with a little help and the correct education.
Once a trader has picked the method that best suits their trading style they need to give up on the idea of the “Holy Grail” and begin perfecting their chosen trading method. Chopping and changing trading methods only leads to confusion and frustration.
The only way to perfect your chosen trading method is to commit to it, and practise it until you have perfected it!
Learn to trade on the Higher Time Frames
Many traders have the misconception that the lower the time frame chart, the more chance they have of making a trade and thus making money. Whilst it is true that traders will get more signals the lower the time frame chart they go down to, it is also true the lower the time frame the more false signals there are and the harder it becomes to making money.
Traders can begin to turn their trading around by taking just this point on alone! The higher time frame charts are where most trading should be done for learning traders.
One of the best reasons the daily chart is a lot more powerful than a lower time frame charts such as the 1hr chart is because of the time that goes into making the signals. An example of this is an inside bar. If we see an inside bar on the 1 hour chart we know that price could not break out of the previous candles range for 1 hour. If however we see an inside bar on the daily chart it means price has gone through all trading sessions including the UK and US sessions and has been unable to break out of the previous day’s range. Obviously a candle with the 24 hours worth of information is telling us a lot more than the candle made up of only 1 hour!
Because of this extra time that goes into making the daily chart signals compared to the lower time frames, the signals are much more reliable and powerful.
Stop Watching Charts All Day Long
Once a trader has committed to only trading the larger time frames such as the daily chart, it is now time to turn get rid of one of the most wide spread trading mistakes there is: “Watching the Charts All Day”!
This trading habit is a very serious mistake many traders make. If traders were to watch the charts all day and not doing anything this would be fine, but from watching the charts all day traders start to make mistakes such as:
Enter trades when they shouldn’t
Take trades off when they shouldn’t
Take profit when they shouldn’t
Tighten stops when they shouldn’t
When a trader has committed to trading the daily charts only they only need to look at their charts once a day. That is it!
When the market closes for the day the trader should switch their charts on and look for possible trade setups. If there is a trade they should set their entry, stops and targets. If there is no trade they need to turn their computer off and walk away and do something else!
There is nothing more they can do. The market has to move and it will do the same thing whether you are watching it or not. Walk away and let the market “do its thing”.
Only Trade With Money You Can Afford to Lose
In the Forex market scared money is lost money. A trader who is placing trades with scared money may as well just give it to a charity. The reason this is the case is because when a trader is fearful they will make trading decisions that reflect that.
The trader who is playing with scared money will commit all type of psychological trading mistakes that will ensure that money is lost.
The only money that should ever be risked in the Forex markets is money that a trader can afford to lose. Traders should never risk money they need for their kids or to put food on the table! This rule is important.
Some people will be saying but I only have $100 for a trading account. This is fine. Many brokers offer mini and micro accounts that will let you trade risking only a few dollars at a time and continue to use correct money management. Over time you can keep adding money to your account from savings to build it up.
Work on Your Mind
One of the most over looked problems in trading is the psychology side of trading. Many traders concentrate day in and day out solely on their trading method or system. This is why many people fail at the Forex business, and as long as they don’t work on their mind they will continue to fail.
Many mistakes a trader makes are based on how they approach and think about the markets and their trading. Trading is a battle that is very much waged in the mind. If a trader doesn’t have the correct mindset and way of thinking, Forex will be forever an uphill battle.
Traders need to focus on this aspect of trading and begin to learn all they can. Reading books and blogs from professional traders is a great way to pick up on skills you can implement into your own trading.
A great book that will help you begin to think about the Forex markets in the correct manner is “Trading in the Zone by Mark Douglas”. I highly recommend buying this book and applying all the principles it contains.