This article looks at the different aspects of a profitable short-term trading strategy including forex signals.
No foreign exchange trading strategy is perfect. Every trader will incur losses at some point. To be successful a short-term trading system must be consistent, profitable and unique in both style and methodology. It must fit the psychological and technical needs of the individual making it user-friendly and easy to navigate. The ideal forex trading system will exhibit the following traits in both trader and strategy:
New traders enter the foreign exchange market with unrealistic expectations of the market and trading. This is due to the demo account being an unrealistic simulation of the live market. The demo account allows for instantaneous execution of trades, as well as risk-free trading with virtual funds. On the live market one will experience a lag in the placing of trade orders and risk with trades.
Patience is required to manage the unrealistic expectations faced when transitioning from the demo or practice environment to live account. You must be willing to wait for the correct opportunity to arise instead of overtrading on all positions. This overtrading can lead to damaging losses.
2. Anticipation of market orders
While some traders are able to show patience, they are often too patient and miss opportunities. This leads to a late entrance into the market in an attempt for maximum profits. In some cases it works, in some it doesn’t.
3. Leave dull markets
Short-term trading strategies require high activity to profit. If you find yourself in a dull or low activity market it is advised you look elsewhere. Time is scarce and sitting in a dull market takes up time and energy.
4. Follow forex signals
The majority of activity during a trading market can be deemed ‘noise’ or market movement without meaning. This is why forex signals are vital. Forex signals are important in short-term strategies as they provide the entry and exit points. Without these entry and exit points you are sure to loss vast amounts of money. By listening to the ‘hubble and bubble’ instead of technical facts you are sure to miss the profit. Follow the signals and avoid experiencing losses.
5. Risk management is key
There are various aspects of a trading strategy which must be adhered to. One of these is the implementation of risk management techniques. These ensure a trader does not lose too much money should the trade turn bad. The most common options are the stop loss and trailing order.
The stop loss order is a stop point that is placed at a predetermined point in a trade. If the trading capital should hit this point, the trade will be closed. The trailing order is flexible and can be adjusted as desired. These risk management techniques have saved traders great amounts, particularly when using leverage.
6. Understanding the market conditions
To be a successful trader you must view each trading day in a larger context. By gaining a view of the market condition, you will be able to predict market movements and anticipate your moves therein. Set-up is the key to success.