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A Few Tips to Improve Your Day Trading Results

2:00 PM Jan 9, 2020
2052
Forex trading

It is quite obvious that a positive result can be achieved by accurate following of a well-constructed trading plan. But that’s just a part of success. There are some tricks that can improve your everyday trading performance.

There are a lot of such nuances and it would be impossible to fit them all into one article. Today we’ll talk about some of them and leave the rest for later. Let's begin.

Start with the Preparation

If you are serious about your Forex career, then trading will firmly enter your daily life. Be ready that every morning you will spend some time looking at the charts assessing the market situation and searching for suitable trading setups.

You need to prepare yourself not only mentally, but also physically. It is important that your body works to its fullest. Therefore, try to devote a few moments to stretching or other physical activity before opening the charts. This way your brain will finally wake up and be ready to work 100%.

Pay Attention to the First Hour

The optimal strategy is trading on price action. In order to do this well, you need to assess the market situation first. The first hour of a trading session is quite indicative. It is the time when lots of pending orders get executed and the most active traders have already entered the market.

Make sure to analyze the situation for this period. This way it will be easier for you to understand who is prevailing on the market at the moment - bulls or bears.

Lean on the Main Trend

Trend trading is considered to be the most reliable method. On a growing trend, you buy currency, on a downtrend you sell it. Due to the high volatility of Forex, it is very important to determine the main trend on charts with a higher timeframe. Draw a line touching the higher highs and lower lows on the chart. If they grow then the trend is upward. If they fall it’s downward.

If you prefer a lower timeframe, then you can repeat the process on a 4-hour chart. However, remember that the signals on the daily chart are more reliable.

Try Trading Against the Trend

This strategy is considered to be riskier than trend trading. However, it will provide you a large number of additional trading opportunities, which can increase your overall result.

The essence of counter-trend trading is to sell when the price bounces from a high and buy when it rises after a bounce from a low. Remember that such swings are short-term. That’s why you need to always monitor your open positions or use a tight Stop Loss.

Use the Economic Calendar

Checking the calendar for the upcoming major economic news releases should be an integral part of your trading routine. At such periods, the market behaves unpredictably, so you need to prepare for this in advance. Many traders use separate strategies, especially during these news releases. Some events make price movements so chaotic that it would be a smart move to avoid the market at all.

Lean on the 1-2% Rule

This is one of the essential rules of any risk management plan. It states that you can not risk more than 2% of your capital in each transaction. For example, if you have $5,000 in your account, then your potential loss should not exceed $100. To control this risk, use a Stop Loss. You need to calculate how far you should set a SL level from your entry point, taking into consideration the size of your position.

Why do this? On Forex, you will definitely come across a losing streak. All participants go through this. If you risk no more than 2% of your capital, then even after 5 unsuccessful transactions in a row you will lose only 10% of your balance. If you risk 10% at a time, then in the same situation you will have only half your investment left.

If you can not calculate this in your head, you can always use a special trading calculator. Knowing the value of one pip for your position, you can set a Stop Loss at the required distance.

Set the Risk-to-Reward Ratio to 1:3

You always risk losing money on Forex. Before entering a trade, evaluate whether it is worth opening it at all. To do this, calculate how much you will potentially earn and how much you can lose. The best trade is the one where you can gain three times as much as you lose.

To evaluate this ratio, you need to decide where to set your Stop Loss and Take Profit levels. The distance to TP must be three times the distance to SL. For example, if your Stop Loss is 10 pips from the entry point, then Take Profit should be at least 30 pips away.

Control Risks with a Stop Loss

From a few points listed above, you have probably understood that you should never trade without a Stop Loss. Use it literally for each of your trades, even if you constantly monitor your trading positions. The market situation can change so quickly that you can lose hundreds of dollars in a few seconds. Stop Loss will automatically close your trades at the right time.

These are all tricks for today. I hope they make your Forex trading more comfortable and profitable. Good luck and see you in the next article.

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