No matter if you are a new or seasoned currency trader, there is always scope to improve your trading skills. So if you need help at improving your currency trading system, here are a few steps worth knowing.
Test strategy across all currency pairs
The first thing to do is to plan a sound strategy, and stick to it while trading. This is why the adage ‘if you fail to plan, you plan to fail’ is so common, and especially important in currency trading. So it is important that traders first understand the traits and characteristics of each of the currency pairs.
This is because some of the currency pairs are rather volatile and tend to fluctuate every day. There are also some currency pairs that are rather steady, and move slowly over long time periods. The next step is for the trader to determine which currency pair is best suited to trade with based on their risk parameters and trading strategy. And the only way to perform a test is to do a test run on various currency pairs and select the currency pair that yields the best result with your strategy.
To improve in currency trading, traders have to decide how long they decide to stay in a particular position. This should be decided based on the chosen currency pair and if the position should be held for minutes, hours or a few days. The trade duration may affect the overall profitability due to rollover charges that eat into profits and other characteristics.
Trader needs to understand and strike a balance between overall profit and trade duration. Trading Have they observed any relationship between trade duration and profitability? Is there a trend where the longer a trade duration, the greater the overall trading profits? Is there any obvious and clear relationship between these two components? You get the idea; so a trader needs to find the optimal trading duration to achieve best overall profits.
Not only do traders have to decide how long they should stay at a particular position but also their exit strategy. This means they have to decide the rate of crashing out of the trade when they are in the winning position and the rate to cut losses if in a losing position. Accordingly, traders should decide on their stops and limits.
There are far too many exit strategies to choose from. The best exit strategy is one that will increase your overall profits with lower risks. How can this be achieved? Consistent rigorous testing needs to be done on your trading strategy with the various exit strategies. How I wish I could provide you with the best exit strategy, however the best strategy does not exist. Therefore, you’ll have to perform your due diligence to test it out to know the answers.
Observing key support and resistance levels
Traders should also incorporate currency news to monitor market information and technical support and resistance levels that affect their positions as this helps improve their trading returns. Normally traders will employ forex trendline as a useful tool to help identify key support resistance levels as well as provide a visual overview of the market condition. Together with forex trendline tool and the right analysis of the price charts, traders can easily implement their trade entries or exits in any trade. Alternatively, one can simply lower a substantial amount of risk by using scaling in trade entries, scaling out trade exits or shifting stop loss to breakeven points as soon as these key levels are reached by the market price.