It’s not hard to get excited about everything that the foreign-exchange (Forex) marketplaces has to offer these days.
More and more people are diving headfirst into the Forex market than ever before, looking to cash in on the kind of action that only this investment vehicle can provide.
At the same time, though, there are plenty of “newbies” that are getting absolutely crushed by the Forex market just because they’re not sure of how to make heads or tails of everything swirling around them.
That’s why we put together this quick Forex market survival guide.
What’s Your Forex Trading Style?
Before you do ANY trading whatsoever you really need to get crystal clear about what your Forex trading style is going to be.
Just as you wouldn’t set out on a cross-country trip without knowing what your ultimate destination was, you can’t expect any real success in the world of investing if you’re not crystal clear about how you’re going to make your goals come true.
Are you going to be a day trader to avoid having to sleep on a Forex pair that could go belly up overnight?
Are you going to be a position trader that wants to take more of a “long-haul” look at the markets to make well-informed moves?
Are you hoping to “trade the notes” every now and again when signals or a red-hot tip comes down the pipeline?
No matter what your trading style is you need to get crystal clear about it and then tailor everything you do in the Forex world to that kind of process.
Always Plan Your Exits
Everybody in the world of Forex as a great idea when they want to get in on specific trades but most have no idea when they need to “pull the chute” and selloff a position – exiting it completely to make a profit or to stop a loss.
This is a huge mistake.
You would never jump into a Forex trade randomly, which is exactly why you shouldn’t “trust your gut” to plan your exits from positions, either.
Instead, you’ll want to have a rough outline for the kind of market conditions you’ll be looking for to exit your position profitably (or to stop a significant loss).
You can always adjust these plans on-the-fly depending on market conditions (that’s never a bad idea). But without this kind of preplanning you’re likely to flounder and waste some pretty good profit opportunities because you waited too long or not long enough on a position.
Learn to Love Expectancy
Expectancy in the world of Forex market trading is a very specific formula that can help you figure out just how consistent and reliable your trading system is.
Obviously, it’s not a perfect predictor of success or failure – market conditions are always going to influence whether or not you win or lose with different positions. But it will give you a better idea of whether or not your overall strategies are effective or need to be tinkered with a little bit.
Take your last 10 trades and run them through the expectancy formula (you can find expectancy calculators online pretty easily) to figure out what your win ratio looks like.
If it’s not where you want it to be, don’t be shy about adjusting your strategy to dominate the Forex market moving forward!