Once you’ve already mastered fundamental and technical analysis, you should start coming up with ways to maximize trading profitability. Some traders are able to achieve this by using forex trading books, working on their trading psychology, or coming up with mechanical systems. For those who don’t want to use up additional resources at first though, here are some simple ways to improve profitability in forex trading:
The first way is to consider adjusting your position size. When you start out as a trader, you are usually advised to risk a specified constant amount in proper risk management. However, when you start to step up your trading game, you should start thinking about adjusting your risk per trade to your level of confidence or the amount of risk entailed in the trade. For example, if you’re taking a trend setup or if retracement scenarios are your expertise, you can up your position size on that particular setup. If you’re jumping against the trend by picking tops or bottoms or if you are trading a news release, you can half the amount you risk in your account.
Next is figuring out how to adjust your trade strategy to the changing trade environment. When you started out, you probably took the setups that were aligned to the market sentiment and your plan. However, as you noticed, it prevents you from catching pips when the market environment is different or when it keeps changing. In particular, you can have a trade strategy that uses the ADX or range indicators when the market is moving sideways. Conversely, you can have a trade plan that favors retracements and extensions for trending market behavior. In addition, your trade plan should also make allowances for changes in volatility.
Lastly, do not be afraid to jump in strong moves. We often wait for retracements to catch big moves at cheaper prices but this sometimes keeps a trader from actually being able to take the trade at all. If you are able to figure out that the price will still pull back, you can stick to this retracement strategy but you should also be prepared to jump in at market if you think price will just continue in a strong direction. Taking note of past price reactions to market catalysts can be a helpful guide in determining if price usually pulls back or if it will just continue in one direction without looking back.
Keep these ideas in mind when trying to work on your trade performance as these simple tips can be crucial in maximizing your profitability.
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3 Ways To Improve Your Profitability
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