Once you've already mastered fundamental and technical analysis, you should start coming up with ways to maximize trading profitability. Some traders are able to achieve this by using forex trading books, working on their trading psychology, or coming up with mechanical systems. For those who don't want to use up additional resources at first though, here are some simple ways to improve profitability in forex trading:
One way to do this is to adopt correct position sizing. When starting out in trading, we are usually told to risk a constant amount per trade in order to manage risk properly. But when you want to make the most of the setups you are confident about or comfortable with, you can advance your trading performance by increasing your risk responsibly or you can scale down when you think a setup is more risky than usual. For example, taking trend setups could be your expertise so you can increase your position size in these scenarios. If the trade setup is against the trend or if you are betting on a result of an economic release, you can reduce the amount you risk on that setup.
Second is learning how to adjust your trade strategy to the market environment. Newbie traders often take trades only when market sentiment aligns with their trade strategy, but it might be better for your profitability to have different strategies appropriate for various market environments. When markets are ranging, you can use indicators that detect ranges or potential breakouts. When markets are trending, you could favor Fibonacci re-tracement and extension levels. You should also have potential adjustments for increased or lower volatility.
Another way to improve profitability is not being afraid to jump in strong moves. We have usually been trained to wait for better prices or re-tracements instead of going long or short in the middle strong price movements. There are instances though when you probably noticed that this prevented you from catching the move at all. By being able to predict if the market will still retrace or not can help you improve your entry strategy. You can do this by observing previous price movements, maybe during the outcome of major news releases, in order to get a feel if the price usually retraces to better entry levels or if you will get left behind on a strong move.
These are just some of the basic tips that can help you make the most of the skills you already have in upping your potential profitability.
One way to do this is to adopt correct position sizing. When starting out in trading, we are usually told to risk a constant amount per trade in order to manage risk properly. But when you want to make the most of the setups you are confident about or comfortable with, you can advance your trading performance by increasing your risk responsibly or you can scale down when you think a setup is more risky than usual. For example, taking trend setups could be your expertise so you can increase your position size in these scenarios. If the trade setup is against the trend or if you are betting on a result of an economic release, you can reduce the amount you risk on that setup.
Second is learning how to adjust your trade strategy to the market environment. Newbie traders often take trades only when market sentiment aligns with their trade strategy, but it might be better for your profitability to have different strategies appropriate for various market environments. When markets are ranging, you can use indicators that detect ranges or potential breakouts. When markets are trending, you could favor Fibonacci re-tracement and extension levels. You should also have potential adjustments for increased or lower volatility.
Another way to improve profitability is not being afraid to jump in strong moves. We have usually been trained to wait for better prices or re-tracements instead of going long or short in the middle strong price movements. There are instances though when you probably noticed that this prevented you from catching the move at all. By being able to predict if the market will still retrace or not can help you improve your entry strategy. You can do this by observing previous price movements, maybe during the outcome of major news releases, in order to get a feel if the price usually retraces to better entry levels or if you will get left behind on a strong move.
These are just some of the basic tips that can help you make the most of the skills you already have in upping your potential profitability.
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