There are various ways one can make money online, and one of them is via forex trading. Forex trading is a goldmine with immense opportunities for traders who know how to go about it.
Forex trading is pretty easy to learn but challenging to master. While Forex presents an opportunity to make money, profits are not guaranteed, yet profit is the main drive why many people consider forex trading. You might trade as a hobby or for an extra income source – making money always seems to be the goal.
Every trader seeking to improve their profit needs some action tips. As a result, this article will explore various ways every trader can scale and maximize their profit while trading Forex.
1. Be careful of High Leverage.
Many trading legends have described leverage as a double-edged sword for obvious reasons. Excessive leverage can quickly shoot up your losses, from which recovering might be hard, the same way it can help maximize your profit. For example, consider an account with a leverage of 1:20 on an account with $2000.
With this, one can trade up to $40000 and get the full benefit as long as the market moves in one’s favor, yet all you invested was $2,000. On the flip side as well, should the market move against you, the reverse will hold. As a result, the higher your leverage, the higher your risk. Leverage should be used when you understand what associated losses mean. Trading using this strategy will shield you from unnecessary losses and protect your portfolio.
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2. Be Strategic With Your Choice of Broker
There are fees from using online brokers, which can add up quickly and reduce the overall money you make when trading Forex. A typical online broker charges in various ways, which is a factor of the trading platforms, technology, policies, and other perks.
These fees could rise, which increases your overall trading cost and bring down your return on investment or make you break even. As a result, boosting your ROI can be easy when you reduce your costs. Make sure to read reviews of forex brokers and compare them. Websites like Earnforex make it easy to do this. You can examine their pricing structure and get insight into their operating system and others before committing to any.
3. Have a Trading Journal
One of the things that makes you consistently successful at trading is the ability to track your progress. In other words, you need a trading journal that tracks the activities, measures profits and losses, and others. In a trading journal, you can have various losses and profits, which will help formulate your trading strategy.
Besides providing optimum insight into results, a trading journal can serve as the right motivation for success. For instance, if the average monthly earning increases over time despite the errors, setbacks, and obstructions, it can boost your morale.
4. Limit the trades you have per session
A lot of traders have a daily profit target and stop loss. Daily profit target is a personal goal, while stop loss is a form of risk management. While these tools are useful, they usually revolve around money. Yet, to boost your trading profits, your trading should move beyond the monetary compensation but the quality of your trading strategy.
One way to achieve this is to reduce the trade you have per session. With limited opportunities come to care and focus, and one will need to choose the trading setup carefully. This will reduce the tendency to trade on impulse and focus on scarce opportunities with high accuracies. Limiting your trade will improve their quality, which will boost your profit over time.
5. Understand Risk
To maximize profit, you need to also think in terms of the money you risk. This is a simple and often overlooked concept with a significant impact on your profit. What makes successful traders stand out is the ability to calculate their risk even before entering a trade. Many traders, however, are guilty of using a simple arbitrary percentage to estimate their risks, like 2 or 3% of their trading balance.
Reflect on your last trading section. Were you aware of the exact dollar value at risk before the trade? Is it the number of pips and percentage of your risked account that caught your attention? It is, however, a good idea to think in terms of money at stake and not the pips and percentages. The reason is that there is no emotional value with pips and percentages. With this, defining your risk strictly on pips will trigger your brain’s logical aspect without stimulating the emotional element.
On the other hand, converting the pip to a dollar amount will allow your brain to know what 200 dollars feel. With this, you can make up your mind if you want to lose such. It will force you to question yourself and the trade to know if it is worth it.
6. Limit Your Pairs
It is tempting to want to explore various currency pairs for profit. Every pair reacts differently to market conditions and other currencies, so it is natural to try and explore them all. However, this strategy’s problem is that it will not make you an efficient trader because you need to be aware of what is happening across various markets. Yet, this is practically impossible when you consider the volatility of the forex market. Simply switching from one chart to another might make you miss out on crucial market moments.
One recommended approach is to limit your trading pairs to three. If you engage trading pairs that affect one another, it will give you access to other trading options.
7. Keep up with the News
The forex market is a pretty volatile one that responds to various conditions like pandemics, speculations, weather, inflations, etc. These are information that is readily available on the news, making it essential to be aware of everything worldwide.
Your ability to technically analyze situations and events, alongside its effect on news updates matters a lot. Also, you need to have the bigger picture in mind and explore the impact of various trading plans and their reaction to market changes.
It is natural to desire to make more money as you trade. Here are tested tips you can apply as you trade to boost your profit. However, as you use these tips, make sure to be disciplined and not allow your emotions to get the best of you.