How You Can Become a Better Forex Trader.

New Year seems to be a great time to make or at least promise to make
new changes for better. What will you do, to be a better trader this
year?

I will like to help you become a better trader by providing you with
trading tips that could both save you money in avoidable losses, and
potentially lead to more profits.

1. Trade with risk capital only. Any money you put into the markets
must be risk capital, money you can afford to lose and not impact your
financial situation. Do not trade if you need the money to pay bills.
It's hard enough to be successful as a fledgling trader. You do not
want the added pressure of having to make money and/or not being able
to afford losing it.

2. Take the time to learn. In order to compete at the highest level in
the trading business and be one of the few truly successful
participants you must be well educated about what you are doing. This
does not mean having a degree from a well respected university, the
market doesn’t care where you were educated. There are many resources
available these days, so there is no excuse for not entering the
markets without being prepared to do the battle.

3. Forex trading is a zero sum game. For every long there is also a
short. If 80% of the traders are on the long side, then the remaining
20% are on the short side. This means further that the shorts must be
well capitalized and are considered to be strong hands. The 80%, who
are holding much smaller positions per trader, are considered to be
weaker hands who will be forced to liquidate those longs on any sudden
turn in prices.

4. Use appropriate stop-loss orders AT ALL TIMES to cut your losses
and never, ever sit back and let your losses run. Almost every trader
at some point makes the mistake of letting his or her losses run in
hope that the market will eventually turn around in his or her favor
but, more often than not, it simply leads to an even greater loss. You
win some, you lose some. Simply learn to cut your losses, take your
occasional lumps and move on to the next trade. And if you made a
mistake, learn from it and don't do it again. To avoid letting your
losses run, get into the habit of determining an acceptable profit
target as well as an acceptable risk tolerance level for each and
every forex trade before entering the market. Then simply place a
stop-loss order at the appropriate price, but not very tight that the
stop could quickly take you out of the position before the market has
a chance to move in your favor.

5. Placing stop loss is an art. You must combine technical factors on
the price chart with money management considerations. One of the most
popular and effective methods of placing your protective stop is to
find a support or resistance area that is within your loss parameter
for that particular trade and place your stop just below that support
or resistance area at a level not ending with zero.

6. Avoid placing protective stops at obvious round numbers. Protective
stops on long positions should be placed below round numbers (10, 20,
25, 50, 65, 100) and on short positions above such numbers.

7. If you are a new trader, be a small trader (mini account) for at
least a year, then analyze your good trades and your bad trades. You
can really learn more from your bad ones. They’re expensive lessons,
you paid for them. Analyze them and learn from them.

8. Trade with a plan, not with hope, greed, or fear. Plan where you
will get in the market, how much you will risk on the trade, and where
you will take your profits. Follow your plan. Once a position is
established and stops are selected, do not get out unless the stop is
reached or the fundamental reason for taking the position changes.

9. Five steps to build a trading system:
- Start with a concept.
- Turn it into a set of objective rules.
- Visually check it out on the charts.
- Formally test it with a demo.
- Evaluate the results.

10. Always think in terms of probabilities. Trading is all about
thinking in probabilities NOT certainties. You can make all the
“right” decisions and the trade still goes against you. This does not
make it a “wrong” trade, just one of the many trades you will take
which, through probability, are on the “loosing” side of your trading
plan. Don’t expect not to have negative trades - they are a necessary
part of the plan and cannot be avoided.

11. Trying to pin-point tops and bottoms in the forex market is very
risky. If you're going to trade tops and bottoms, at least wait until
the price action actually confirms that a top or a bottom has been
formed before you take a position in the market. Exercising a little
patience and waiting for a proven top or bottom to form can increase
your odds of profiting and somewhat reduce your risk.

12. The double-top formation is confirmed only when the full
completion of the two rallies and their respective reversals is
followed by a breach of the neckline (the closing price is outside the
neckline ).The failure of the price to break through the neckline puts
on hold or negates the validity of the formation.

13. Learn to be comfortable being in the minority. If you are right on
the market, most people will disagree with you. (90% losers,10%
winners).

14. Carry a notebook/diary with you, and write down interesting market
information and your personal observations. Re-read your notes from
time to time and use them to help analyze your performance.

15. Patience is important not only in waiting for the right trades,
but also in staying with trades that are working.