If you thought that I can’t offer you any other useful tricks for you then you were wrong. Today you will receive a new portion of useful information that, if properly applied, can increase your overall performance. Let's get started.
Stay on Top of the Latest Market Events
Perhaps technical analysis will always remain the most reliable type of market analysis. But don’t forget about the fundamental approach as well. Of course, the news itself is not able to globally affect the market. However, the reaction of traders to current events determines a further movement of prices on Forex.
The major economic news is not the only type of news that influences the FX quotes. Market events are often able to reverse the prices of currency pairs in just a few minutes. Therefore, try to stay abreast of the latest changes in the financial world. In order to do that, you can use well-known portals:
- Reuters
- Bloomberg and so on
Strictly Follow Your Risk Management Plan
Yes, this point is quite obvious, but too many traders neglect it and as a result, lose their entire capital and leave Forex for good. It is crucial to avoid reckless trading decisions and to assess the risks before opening any trade. Even if the trading setup seems perfect to you, do not enter the trade unless you are sure that it is worth it.
Use Pending Orders
This particular type of order should become an indispensable tool for every day trader. This is especially true for those who combine Forex with another job or study. So basically for almost all Forex participants.
Day traders have quite a few suitable trading setups during the day. But you should agree that it is impossible to stay round the clock in front of charts anticipating those opportunities. That’s when pending stop and limit orders come into play. Once you’ve determined a suitable entry point, place a pending order and get back to your daily affairs. When and if the market goes in the direction you need, your orders will automatically open.
Another useful feature of this tool is the reduction of possible slippages for your positions. Even if slippage does occur your order simply will not open.
Forget About Trading During Major News
Unless you have developed some unique trading strategy that works perfectly during important world news releases, or unless you trade using your luck only, then it is best to stay away from the market at such times. Besides the fact that the reaction of traders causes the formation of huge spikes, these moments are associated with a number of other unpleasant events:
- A sharp increase in the value of each transaction due to a significant spread expansion
- Closing your Stop Loss positions due to a sharp jump in the price, which later turns in the direction you actually need
- Slippage and gaps
Don’t Leave Your Positions Opened Overnight
If you decide to be a day trader, then be an actual day trader and close all your open positions at the end of every trading day, even if they are now at a loss. Too often at night, the market makes sharp reversals. Since you are unlikely to stay at the computer at night, there is a high risk of losing a significant portion of your investment.
Take Care of Your Profit
If your open trade brings you profit, the money is not yours until you close the position. The market can turn against you at any moment and you will lose all potential profit. How to protect it?
If the market is confidently moving in the direction you need, then you need to trail your Stop Loss. If you use the 1:3 risk-to-profit ratio rule described in the previous article, then once the price passes one-third of the distance to your Take Profit level, you can move the SL to the entry or breakeven point. When the price goes another third to TP, you can again move your Stop Loss by the same third. This way you can protect your profits step by step. However, this strategy, obviously, works only for those traders who can monitor their open positions throughout the day.
Leave Emotions Outside Forex
Emotions are generally a useful thing, but not when trading. Give all your feelings to your friends and family and come to Forex with a clean head. Emotional trading causes the largest number of mistakes among novice traders. They trade out of revenge, open too many trades out of greed or miss unique trading opportunities because of fear and uncertainty.
There is only one way you can start trading without emotion. And that is following your trading plan. Make sure it includes an accurate description for entry and closure of positions. That’s how you can assess which trades should be avoided and which ones should be opened.
Of course, at first, it will be difficult for you to cope with emotions. Everyone goes through that. You can try to track your feelings by writing them in a diary. Further analysis will help you learn how to control them.
Well, that's all for today. Quite a lot of useful information but that is still not the end. In the next article, I will tell you about a few more useful tips. It will become the last in the series of useful ideas for day traders. Good luck with trading and make sure to use the tips from this article.