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When it comes to trading it can be tempting to reach for the stars and make foolish forex trading decisions on a whim. But this can be disastrous. To avoid catastrophic losses and protect your capital, it’s essential to respect the volatility of the markets and implement good risk management techniques. So, with this in mind, here’s a cheeky little preview of how to trade forex like a Jedi.
“Much to learn, you still have” –Yoda
Whether you’re a trading newbie or have years of experience, there’s always something to learn. Make forex education your favorite pastime. Read e-books and tutorials, check out video courses and webinars and even visit the education section of your broker’s website. If you have a question, don’t hesitate to ask for support as the answer could influence your future trading decisions.
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“Your focus determines your reality” –Qui-Gon Jinn
One of the best ways to stay focused on the markets and to practice your trading skills is to open a demo account. This allows you to trade in real market conditions with real-time trading situations. It’s an awesome way to get familiar with a particular trading platform as well as the dynamics of the Forex market. What’s more, a demo account is not just for newbies. Experienced traders can also use this type of account to test a strategy before implementing it using real money.
“Many of the truths we cling to depend greatly on our point of view” –Obi-Wan Kenobi
Knowing what kind of trader you are will greatly influence your trading decisions. While some people are aggressive and ambitious, others are conservative and careful so it’s important to understand your tolerance to risk. Self-awareness will help you to determine entry points and exit points and decide whether to nosedive into a volatile market or steer clear until the dust settles. It will also help to determine your capital allocation.
“Be careful not to choke on your aspirations” –Darth Vader
While making money is the whole point of forex trading, you must approach the markets with great care and not let your aspirations get the better of you. Begin trading with small sums of money and place small trades, particularly if you’re a newbie. It’s not advisable to increase your lot sizes until you’re completely confident with your trading strategy. And even then you shouldn’t be overly complacent. Be aware of the high leverage available for currency trading too. Leverage increases your buying power enabling you to place much bigger trades, but it can also lead to much bigger losses too.
“There’s no such thing as luck” –Obi-Wan Kenobi
You need to have a well-defined strategy, based on your financial goals and risk appetite. Broadly speaking, you can choose to be a scalper, a swing trader, a day trader or a positional trader. Following this, it’s a great idea to consider different market moves and what your action would be against each. Whatever strategy you choose, don’t forget to test it with a demo account.
“A Jedi must have the deepest commitment” –Yoda
Remember, there are no shortcuts to making money in the Forex markets. Devote enough time to learning and trading. Once you have your plan in place, stick to it. Be systematic. Try to develop a consistent and persistent approach to trading. Avoid making random buying or selling decisions based on emotions or last-minute price fluctuations.
The Jedi Code
Here are some Star Wars-inspired tips that will hold you in good stead:
- “This is some rescue. You came in here and you didn’t have a plan for getting out?”—Princess Leia. In other words, set stop-losses for every trade as this will protect your capital.
- “Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.” —Yoda. When trading Forex, don’t let emotions rule or even slightly affect your decision. Keep emotions separate from trading by sticking to your strategy.
- “The fear of loss is a path to the dark side.” —Yoda. Don’t be afraid of losses. Even the most successful trader loses some trades. That said, never trade to compensate for losses and always minimize your losses by implementing risk management techniques.
You have the convenience of trading forex from anywhere, at any time and using any device. So, as Yoda said, “Do. Or do not. There is no try.” This essentially means that a halfhearted approach sets you up for failure. You can’t succeed at forex trading, or anything in life, by giving far less than your best. You need to have patience and perseverance to succeed.