How to profit consistently in Forex trading

September 06, 2016 12:28 UTC

How to win consistently in Forex trading

There are a lot of aspiring traders who would love to learn how to be consistently profitable in Forex. Actually, this is exactly what they are looking for when they submerge themselves into the markets.

The first thing they should do (and probably know of) is to find their own strategy—or several of those—which would fit their trading style, individual features, and expectations. There is a vast number of various strategies to apply or adjust them to one's preferences, so that certain profit can be expected eventually. The main piece of advice to give to every beginner is, always to do backtesting. It means that, before any strategy is implemented, it needs to be executed retrospectively, in the past, in order to see how it is behaving. However, no matter how thorough backtesting is, there is no certain way to predict profitability of the strategy based on hypothetical past data.

Choosing a trading method is not enough. A trader should be able to stick to his/her strategy, while being quite adjustable to the outside factors. Some planning or structuring the trading process would be very beneficial for everybody, as incongruence often leads to major losses.

In this article, you will find some useful tips on organising your trading activity, which will help you to get a hold of the big profit sooner.

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Chasing the money is always a bad idea

Everyone would agree that traders join the world of financial markets exclusively for the profit. Earning money is the end goal of almost everyone who is involved in some kind of market relations.

So, there is no point to emphasise it in case of trading. Chasing money is never an answer to the question "How to be consistently profitable in Forex trading?" Moreover, it's a serious obstruction on your way to earnings.

Trading is indeed, much like a gamble; but, unlike gambling, here it's all about planning and testing. There is a very small chance that you can win it all overnight.

More likely, you will lose all your investments because of one impulsive action. You should not rely on short-term winnings or instant profits in trading. Sometimes, the price does move instantly and there is a real temptation to jump in.

There are traders who believe that they will get the big bite, but most of them lose. If you don't want that fate, then take it as a fact that an instant win is not what you came in trading for.

In fact, it might sound a bit obscure, but you should better forget about the profits altogether. If all you are thinking is profit, then you will eventually become more persistent about getting it sooner. Persistence is not the same as consistency, as it leads to excessive trading, which is another "no" on your list.

Rather than being obsessed about money, try to get into learning. There is plenty of information, as well as practical tools, that are available anytime to anyone. This is some great chance to upgrade your trading skills and deepen your understanding of trading strategies, methods, and the market itself.

It is very useful to absorb loads of trading-related information, as this field is constantly changing and evolving, and you will need to keep up with it. In some time, you will see the advantage of that.

Do not chase the market

Traders who are looking for the opportunity to get their big profit, tend to become obsessive about trading. This is called "chasing the market". They imagine unlimited possibilities that come along with trading, they picture a large sum of money which they want to get at any cost.

Sometimes, they try to get it at the cost of their time – by trading too often, and sometimes they pay with their money – by giving away too much. It doesn't really get along with how to make consistent profits in Forex trading.

We'll deal with the two "symptoms" of overtrading separately. At first, let's consider chasing the market too often. Warren Buffett, a well-known American investor, once said that business is all about discipline. Self-discipline.

Unlike baseball, when a player has to swing all the time, no matter if he likes the pitches or not, a businessman does not have to do anything at all. It is a matter of patience and free will. If the current price is not to your liking, then you can sit back and just watch.

However, if the price feels right and good, and you feel confident about the timing, then you are free to take an action. He concluded, "You only need a couple of swings."

This can be easily applied to Forex trading. There is no need to rush and make entries whenever the price swings just a bit. If you are following your strategy consistently, then a few trades might be enough for you to get a nice result. Fortunately, most strategies allow to just preset the signals for entering. Follow it, and don't take unnecessary risks.

The second side of chasing the market is investing too much. How dangerous is trading with a lot more funds than you can afford?

Leverage that Forex traders take has mainly a marketing purpose. This way, the actual trading activities that brokers offer would seem more significant to traders who join. They could get a taste of a real profit and probably even earn it. When it comes to practice, new traders get tempted by all the potential profit and take a significant leverage from brokers. The result? They lose more often than not.

Still, it is not that bad a thing that high leverage exists in the first place. Traders can operate large volumes, while being more secure in case of a drawdown, thanks to the free margin limitations. With larger volumes, pip value increases as well.

Nevertheless, trading high volumes increases the susceptibility of a particular account to price movements. Thus, on the one hand, leverage should be treated with great caution and respect, while on the other, it provides certain opportunities to traders and gives them more trading freedom. Overtrading would be a bad mistake here.

You cannot win forever

Remember that "consistently" and "constantly" are two different words, and sometimes, they are used to describe the opposite approaches. While you can win consistently in Forex by following your strategy and being reasonable, it is doubtful that you will win constantly. Losses are often an essential part of the trading process.

In any case, "winning" is not the best word that can be used in relation to trading. As we have mentioned before, trading is not gambling, and nobody can hope for a huge profit without having to do anything to achieve this. Also, getting out of every trade with a profit is nearly impossible; there are always losses.

It always matters which period of time we consider when we say "consistently profitable". Are we talking about a day, a month or year? It is very hard to gain profit consistently day after day, but, in the long run, your trading report might look exceptionally good.

So learn to take losses as something inevitable, something that happens to all.

Balance is everything, and patience is the key to it. Experienced traders confess that only 40% of their trades end with success. More often, it is even less than that.

Although this might seem obvious, it requires some nerve in reality to end a losing trade earlier and avoid sufficient losses (instead of hoping that it will even out sooner or later). It also requires a lot of patience to follow the upward trend until its peak, but not make an exit as soon as some profit is gained.

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Good organisation will keep you in shape

We have said about the desirable trading mindset and aspiration towards consistency, but there was nothing about maintaining the schedule and structure.

In fact, self-organisation is the most important thing for any undertaking, to which one plans to dedicate a significant amount of time. Structuring your trading activities will allow you to save a lot of time and bring trading to a more serious level. It is better to get rid of all the irrationality and impulsiveness when it comes to money.

Making a routine out of trading is a very good idea. At the same time, it is necessary to get rid of the "bad habits", such as those that can lead to overtrading (making a trade after profit is gained, in order to increase the profit).

Habits are formed very easily, especially when they are reinforced by positive outcomes. If you succeed and make an impressive amount of cash, it does not mean that similar circumstances will make you succeed once again.

It is nearly impossible to be profitable all the time. This is why the best way to be consistently profitable in Forex trading is to strictly follow your trading schedule, as well as your strategy.

To summarise all the tips every trader should take to attention, let us remind you to:

  1. change your expectations to rational thinking
  2. choose your strategy with preset conditions for making entries and exits
  3. do a lot of backtesting
  4. follow the strategy that already showed you good results
  5. keep a record of all the trades to analyse your experience and learn from it
  6. not overtrade ever
  7. and make assessments of long-term periods of trading rather than short-term ones.

It is important to follow all these hints, as they have proven to help people "nail it" in trading. If you stick to them, you will soon be counting your first long-term profits.

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