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Using Moving Averages in Binary Options
What are Moving Averages?
Moving averages (MA and EMA) are indicators that exert their action by smoothing out price action over a specified period of time.
They can therefore be used as a means of predicting future price action. If you look at a chart with a moving average indicator, you can get a sense of price direction from the slope of the moving average indicator.
Generally speaking, it is better to use moving averages that smooth out price action over a longer time frame because they do not respond readily to choppy price movements and so provide more reliable signals.
Of the four types of moving averages, only two should be of concern to the binary options trader. These are:
– Simple moving average (SMA)
– Exponential moving average (EMA)
Moving averages can be used on their own to detect binary options trading opportunities, or they can be used as components of trading strategies in which case, they must be combined with other indicators or other parameters of technical analysis.
Using Moving Averages in Binary Options
Moving averages are prone to fakeouts because of the very nature of their function. The shorter period moving averages respond earlier to sharp price movements, while the longer period moving averages tend to lag with price. So while the moving averages based on shorter time periods can be used to identify new trends earlier, they tend to give many false alarms. If the trader were to rely solely on the longer time frame moving averages, they would only be useful in picking up long lasting trends on the longer term time frames because they lag so much.
Now the above points noted may be of concern to traders who trade forex because in the forex market, profits are a function of how many pips can be garnered, which puts a lot of emphasis on getting in on the trend early. In binary options where a single pip can put the trade in the money, this is less of an issue. Consequently, the trader should primarily be concerned about picking up trend direction.
This leaves binary options traders the option of using moving averages in the following ways:
a) Using moving average crossovers
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b) Using moving averages as dynamic support and resistance tools.
Moving Average Crossovers
If you use the moving average crossover strategy, you are essentially aiming to find tradable points where the faster moving average crosses above or below the slower moving average (you can read our article dedicated to moving average crossover strategy here).
The CALL signal would therefore occur if the faster moving average crosses above the slower moving average, and the PUT signal would be generated if the faster moving average crosses below the slower moving average in a downward direction.
A good combination would be to use a 10 SMA and a 20 SMA. Crossovers must always be traded with confirmation, either with candlestick patterns or some other indicator which would confirm the move in the direction of the crossover.
MAs as Dynamic Support and Resistance Tools
Moving averages move in the direction of the trend, but in this manner, they can also function as dynamic supports (in an uptrend) and dynamic resistances (in a downtrend). We use the words dynamic because the supports and resistance points they form are not at the same static horizontal level, but are constantly changing. In other words, when the price takes a brief retracement, it is expected to bounce off the moving average in an uptrend and retreat from a moving average in a downtrend. The 50 EMA is a good moving average to use for this setup.
For the binary options trader, all that needs to be done is to place a CALL at a dynamic support and PUT at a dynamic resistance. Further confirmation is provided if the candlestick pattern at the dynamic support/resistance supports the move (e.g. a morning doji star at a dynamic resistance in a downtrend).
Assuming there is a break of the moving average, it will change function because such a break indicates a trend reversal. So a broken dynamic resistance will automatically become a dynamic support level, and a broken dynamic support will turn around to become a dynamic resistance.
Moving averages can be used to pick out binary options trades of the Call/Put variety, but they usually require confirmation because they tend to either produce fakeouts or lag behind the market.
More About Adam
Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.
Two Moving Averages
What is needed in order to make a prediction for binary options ? I have to say it is the power of everyone ! All this would require is a high class trading platform and the two moving averages. And that the trading was not just a game, and could generate your income in the form of real money, you will need some money, although, the market now offers free trading on the stock exchange with a of free binary options, so the last item can be completely eliminated.
The best indicator for the forecast – The Moving Averages
The Moving Average is a technical indicator that shows the average price of an asset for a specified period of time. Simply put, the indicator takes the average price on the chart depicts the average value of an asset in the form of a line. This makes it possible to obtain data for subsequent motion prediction assets quotations in a more convenient form than the chart of quotations from the chaotic movements. The direction of the moving average motion is essentially is a forecast for binary options, which can be effectively used in open contracts. If the moving of the indicator is pointing downwards – this means that the average price quotations have negative values, so it is necessary to issue contracts to reduce the value of the asset. Conversely, if the moving average is directed upwards – this means that the average price of an asset for a given period is positive and should conclude contracts UP.
– it allows you to optimize the trade signals in trading system. This combination of indicators with different periods is able to show how the correct data each indicator gives separately. Thus, the trader is able to determine the optimal point for processing the transaction:
When installing two moving averages on the chart we get a convenient work space to operate and profit :
Thanks to these unique features, such as: flexibility, accuracy, ease of use and convenience, the Moving Average, you can safely assume, is the best technical indicator for trading in binary options. With this indicator, you can make the most accurate prediction for binary options and use it to make a profit, and this will be a steady income, which is very important for the performance of any trader. This high rating indicator moving average is not an empty phrase. It is known among the professional traders that the Moving Average indicator have earned more money than the rest of all technical indicators combined. We agree, this is a good assessment of its work, it is not only an indicator of popularity, but also about of effectiveness. That’s why it is called the best indicator !
Let us now move onto the practical application of a moving average indicator and look at how it can be used to make a projection of binary options, as well as how to apply the two moving averages to predict the direction of movement of the asset quotations.
So, to apply technical indicator to our quotes assets, we would take a trading platform from Binomo broker, where the Moving Average is included in a standard set. During the build of the moving average, set the indicator to “50”, and for the second period of the build, set the indicator at “5”. The graph of quotations shows two lines or moves of indicators. You can immediately see that the data lines on the chart are constantly crossing each other. This is the signal for opening of trading positions. The indicator shows the direction of further quotes movement. All that is left for the trader is to get the following forecast for the binary options as an intersection of two moving averages and execute a contract in the direction of their intersection. I.e:
- At the intersection of Moving up the contract UP option opens :
- At the intersection of Moving down the contract DOWN option opens:
If you rewind a little history of quotations, you will notice that the price behaves this way in 80% of cases. Crossing of Moving Averages indicator in either direction fairly clearly signals about the continuation of price movement of quotations in the intersection direction. Therefore, the trader has at his disposal a stable working tool of analysis and market forecasting.
Having dealt with the indicator and its trading signals you may have only one problem. This is the choice of the trading platform, where it is possible to apply best indicator for options – the moving averages indicator to the chart quotes .
To create this article we used a Binomo broker terminal , which, in our opinion, is the best web terminal for binary options where you can use two moving averages and get with their help the most accurate prediction for binary options. This trading platform has everything you need for a successful increase in your trading account !
See also similar strategies:
Moving Average Strategies for Forex Trading
A forex trader can create a simple trading strategy to take advantage trading opportunities using just a few moving averages (MAs) or associated indicators. MAs are used primarily as trend indicators and also identify support and resistance levels. The two most common MAs are the simple moving average (SMA), which is the average price over a given number of time periods, and the exponential moving average (EMA), which gives more weight to recent prices. Both of these build the basic structure of the Forex trading strategies below.
- Moving averages are a frequently used technical indicator in forex trading, especially over 10, 50, 100, and 200 day periods.
- The below strategies aren’t limited to a particular timeframe and could be applied to both day-trading and longer-term strategies.
- Moving average trading indicators can be used on their own, or as envelopes, ribbons, or convergence-divergence strategies.
- Moving averages are lagging indicators, which means they don’t predict where price is going, they are only providing data on where price has been.
- Moving averages, and the associated strategies, tend to work best in strongly trending markets.
Moving Average Trading Strategy
This moving average trading strategy uses the EMA, because this type of average is designed to respond quickly to price changes. Here are the strategy steps.
- Plot three exponential moving averages—a five-period EMA, a 20-period EMA, and 50-period EMA—on a 15-minute chart.
- Buy when the five-period EMA crosses from below to above the 20-period EMA, and the price, five, and 20-period EMAs are above the 50 EMA.
- For a sell trade, sell when the five-period EMA crosses from above to below the 20-period EMA, and both EMAs and the price are below the 50-period EMA.
- Place the initial stop-loss order below the 20-period EMA (for a buy trade), or alternatively about 10 pips from the entry price.
- An optional step is to move the stop-loss to break even when the trade is 10 pips profitable.
- Consider placing a profit target of 20 pips, or alternatively exit when the five-period falls below the 20-period if long, or when the five moves above the 20 when short.
Forex traders often use a short-term MA crossover of a long-term MA as the basis for a trading strategy. Play with different MA lengths or time frames to see which works best for you.
Moving Average Envelopes Trading Strategy
Moving average envelopes are percentage-based envelopes set above and below a moving average. The type of moving average that is set as the basis for the envelopes does not matter, so forex traders can use either a simple, exponential or weighted MA.
Forex traders should test out different percentages, time intervals, and currency pairs to understand how they can best employ an envelope strategy. It is most common to see envelopes over 10- to 100-day periods and using “bands” that have a distance from the moving average of between 1-10% for daily charts.
If day trading, the envelopes will often be much less than 1%. On the one-minute chart below, the MA length is 20 and the envelopes are 0.05%. Settings, especially the percentage, may need to be changed from day to day depending on volatility. Use settings that align the strategy below to the price action of the day.
Ideally, trade only when there is a strong overall directional bias to the price. Then, most traders only trade in that direction. If the price is in an uptrend, consider buying once the price approaches the middle-band (MA) and then starts to rally off of it. In a strong downtrend, considering shorting when the price approaches the middle-band and then starts to drop away from it.
Once a short is taken, place a stop-loss one pip above the recent swing high that just formed. Once a long trade is taken, place a stop-loss one pip below the swing low that just formed. Consider exiting when the price reaches the lower band on a short trade or the upper band on a long trade. Alternatively, set a target that is at least two times the risk. For example, if risking five pips, set a target 10 pips away from the entry.
Moving Average Ribbon Trading Strategy
The moving average ribbon can be used to create a basic forex trading strategy based on a slow transition of trend change. It can be utilized with a trend change in either direction (up or down).
The creation of the moving average ribbon was founded on the belief that more is better when it comes to plotting moving averages on a chart. The ribbon is formed by a series of eight to 15 exponential moving averages (EMAs), varying from very short-term to long-term averages, all plotted on the same chart. The resulting ribbon of averages is intended to provide an indication of both the trend direction and strength of the trend. A steeper angle of the moving averages – and greater separation between them, causing the ribbon to fan out or widen – indicates a strong trend.
Traditional buy or sell signals for the moving average ribbon are the same type of crossover signals used with other moving average strategies. Numerous crossovers are involved, so a trader must choose how many crossovers constitute a good trading signal.
An alternate strategy can be used to provide low-risk trade entries with high-profit potential. The strategy outlined below aims to catch a decisive market breakout in either direction, which often occurs after a market has traded in a tight and narrow range for an extended period of time.
To use this strategy, consider the following steps:
- Watch for a period when all of (or most of) the moving averages converge closely together when the price flattens out into sideways range. Ideally, the various moving averages are so close together that they form almost one thick line, showing very little separation between the individual moving average lines.
- Bracket the narrow trading range with a buy order above the high of the range and a sell order below the low of the range. If the buy order is triggered, place an initial stop-loss order below the low of the trading range; if the sell order is triggered, place a stop just above the high of the range.
Moving Average Convergence Divergence Trading Strategy
The moving average convergence divergence (MACD) histogram shows the difference between two exponential moving averages (EMA), a 26-period EMA, and a 12-period EMA. Additionally, a nine-period EMA is plotted as an overlay on the histogram. The histogram shows positive or negative readings in relation to a zero line. While most often used in forex trading as a momentum indicator, the MACD can also be used to indicate market direction and trend.
There are various forex trading strategies that can be created using the MACD indicator. Here is an example.
- Trade the MACD and signal line crossovers. Using the trend as the context, when the price is trending higher (MACD should be above zero line), buy when the MACD crosses above the signal line from below. In a downtrend (MACD should be below zero line), short sell when the MACD crosses below the signal line.
- If long, exit when the MACD falls back below the signal line.
- If short, exit when the MACD rallies back above the signal line.
- At the outset of the trade, place a stop-loss just below the most recent swing low if going long. When going short, place a stop-loss just above the most recent swing high.
Guppy Multiple Moving Average
The Guppy multiple moving average (GMMA) is composed of two separate sets of exponential moving averages (EMAs). The first set has EMAs for the prior three, five, eight, 10, 12 and 15 trading days. Daryl Guppy, the Australian trader and inventor of the GMMA, believed that this first set highlights the sentiment and direction of short-term traders. A second set is made up of EMAs for the prior 30, 35, 40, 45, 50 and 60 days; if adjustments need to be made to compensate for the nature of a particular currency pair, it is the long-term EMAs that are changed. This second set is supposed to show longer-term investor activity.
If a short-term trend does not appear to be gaining any support from the longer-term averages, it may be a sign the longer-term trend is tiring out. Refer back the ribbon strategy above for a visual image. With the Guppy system, you could make the short-term moving averages all one color, and all the longer-term moving averages another color. Watch the two sets for crossovers, like with the Ribbon. When the shorter averages start to cross below or above the longer-term MAs, the trend could be turning.
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Reading time: 23 minutes
Forex trading is accessible, exciting, educational, and offers traders lots of opportunities. Despite all this, many traders fail to learn how to become successful traders, and don’t achieve good results in this market. In fact, a high percentage of Forex traders are losing money. Learning to trade Forex and learning how to trade in general can be difficult, and that’s why we have created this article for you.
This article will teach you how to become a successful Forex trader, and how to trade on the live markets. Additionally, it will show you the best trading practices for beginners. In fact, since you’re reading this, you are already on the right path to becoming a successful Forex trader. Below, you will find actionable advice for beginners and pros alike. Without further ado, let’s dive right in.
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What is a Trader?
A trader is someone who places orders on the market, sometimes on behalf of financial institutions (big banks, investment funds, hedge funds), or other times, as an independent trader. Exchange orders, such as purchasing or selling stocks, are either in the trader’s own name, or on behalf of clients or for the financial institution or broker that employs them.
There are several categories of traders depending on the traded markets: foreign exchange (forex), equities, bonds, metals, coffee, meat, etc. In today’s world, there is a trading market for almost all goods (meat, coffee, etc.) and commodities. Most existing contracts are settled in foreign currency, and do not deal with physical delivery.
For example, a professional money market trader manages the cash needs and surpluses on behalf of the bank or clients for which they work, in the short or medium term. A forex trader manages currencies based not only on client needs, but also on the various fluctuations expected in the short and medium-term. An equity trader, on the other hand, trades shares in anticipation of market behaviour, as the trader’s goal is to buy before the share price increases and sell before they fall.
Types of Successful Traders
As we mentioned previously, there are two general types of traders:
- Those who trade on behalf of clients
- Those who trade on a personal account
Traders who work for financial institutions or brokers buy and sell shares on behalf of their employer’s clients, and not with their own money. This means that rather than making a profit or a loss on the trading itself, they earn a salary as a trader. In this case, the trader takes virtually no risk in the market – it is on the customer buying or selling financial instruments to cover the risk. The trader’s clients may be anything from individuals to companies that do not have a trading room of their own.
Those who trade on their own personal account are using their own money to earn profit for themselves on each individual trade, and not through a salary. These accounts are funded with their personal funds, and trades are executed through online trading platforms. Even though online brokers offer leverage, the amounts traded by home traders are much smaller than those of a professional trader. Since online trading is often done on the OTC (Over the Counter) market, the success of traders in their own accounts are only estimates.
How to Become a Trader: Defining Success
Now that you know what a trader is, how can you become a trader? Better yet, how can you become a successful trader?
The first thing that you need to do when it comes to trading Forex is to understand what you want to achieve, and how you define success. What do you want to achieve?
This is something professional trader and coach Markus Gabel discusses in detail in the free webinar on becoming a successful trader below.
In deciding what you want, you have to be realistic. Set yourself a realistic and quantifiable goal. This could be something like: achieve 20% annual return on investment, earn 5000 USD of profit, get a total of 100 pips per month or something similar. Whatever you decide, your goal should also be easy to measure. What is also important is to set a goal that can be achieved over a long time frame – it is recommended to set an annual goal to achieve rather than a monthly goal.
Once you have set your main trading goal for the year, it is now time to start learning how to achieve it. The best way is to identify which resources are available to you. This may include the size of your deposit, the amount of time you are willing to spend on trading, and the amount of available funds you are willing to spend on trading-related matters (software, etc.).
Once you have a clear vision here, it is time to make an action plan. This action plan should include the currency pairs you are planning to trade and the number of trades you are going to commit to.
This can feel a bit overwhelming for new traders, so the good news is that in this article we share our top 10 tips to help you become a successful trader.
But first, if you’re a rookie trader looking for a place to learn the ins and outs of Forex trading, our Forex 101 Online Trading Course is the perfect place for you! Learn how to trade in just 9 lessons, guided by a professional trading expert. Click the banner below to register for FREE!
10 Beginner’s Steps to Become a Forex Trader
1: Set aside expectations
Problems arise when new traders become obsessed with chasing profits, and this anxiety can lead to mistakes that cause losses.
So the first rule to become a trader is to forget unrealistic goals and objectives. The prospect of earning money in Forex with just a few quick trades is extremely unlikely. Operating in a risky and overconfident way can lead you to lose your initial investment.
By setting a high profit objective, you create great emotional pressure, which could result in one of the biggest errors people make when trying to become traders: falling into excessive actions or overtrading. We will return to this concept in tip #7.
Generally, most veteran traders focus on a single thought: “Earn the money you need and don’t stress about earning more.”
As an alternative to focusing only on how to earn money in Forex, try to focus on learning a trading strategy and researching all the trading tools that are within your reach. This will help you establish a lasting approach so you can become a successful Forex trader.
2: Define your trading risk profile
Before making any substantial commitments, get a good understanding of the fundamental aspects of the market. Assess your capital at hand, read trader testimonials so you have realistic expectations of returns, and research the markets and currency pairs you’re interested in. If you don’t feel comfortable with the dynamics, don’t invest in forex, even if it’s profitable. This applies to any market.
If, on the contrary, you think that your investment approach is in line with the Forex market, go ahead!
But keep in mind the following:
- Invest only what you can afford to lose without affecting your standard of living.
- Diversify your investment, it is recommended that you do not invest more than 20% of your total investment funds in any one market.
- What is your risk profile: Moderate? Aggressive? Conservative?
- Prepare to lose. If after a series of bad trades you are willing to keep trying, forex is your market!
3: Choose a trading strategy
Once you’ve chosen to become a trader, the next step is to come up with a general strategy. There is no right or wrong way to trade, what really matters is that you define the strategy you will use in different situations.
Sometimes you will see that one trading strategy works well for a currency pair in a given market, while another strategy is more suitable for the same pair in a different market, or in other market conditions.
To become a successful Forex trader, try to focus on harmonising your online trading strategy with your risk profile. Research all the trading tools that are within your reach. Study the techniques that seem logical, and think about how they can be used in your strategy. In addition, you can study how markets behave and learn how the industry works.
Finally, if you want to succeed in trading, don’t forget to do extensive tests by backtesting your favorite markets until you feel secure in your strategy.
4: Set aside your emotions
This may sound very simple, but it is necessary. Emotions are the worst enemy of people who want to become traders. Some traders try to see trading as a game where they try to beat the market, and then when they start losing, they feel overcome with disappointment.
First of all, trading is not a game, and you should never treat it as one. Forex trading is a financial activity that is a mix of analysis and discipline. You should not blame the market, or worry about your losing trades.
To become a successful trader, you must understand the mechanics of forex, trust your analysis, and follow the rules and strategy you set. This is the definitive key to reaping the benefits of forex. Emotions can ruin a trader’s experience, so it is vital to set them aside and not involve them in trading.
If you are down, do not trade. The same goes for being excessively confident and excited: refrain from trading, or be knowledgeable about your mental state. Excessive trading confidence can cause great losses.
One of the best ways to prepare yourself for the emotions of trading is by testing your skills on a free demo account.
Instead of heading straight to the live markets and putting your capital at risk, you can avoid the risk altogether and simply practice until you are ready to transition to live trading. Take control of your trading experience, click the banner below to open your FREE demo account today!
5: Set your stop loss and take profit
No matter what your trading strategy is, you should always set a stop loss. This type of order allows you to define the closing price of your trade. Your trade will close once it reaches that level, even when you are not present. In other words, setting a stop loss will give you the peace of mind of not losing more than the limit you defined.
Note that stop losses are not a guarantee, as there may be occasions where the market behaves erratically and presents price gaps. If this happens, the stop loss will not be executed at the predetermined level but will be activated the next time the price reaches this level. This phenomenon is called slippage.
The take profit is the most frequently used order in the forex market. This order allows the trader to close a position automatically when prices reach a predefined level.
In the video below, you can learn how to set stop losses and take profits in MetaTrader 4 and 5.
6: Keep up with the markets
How can you become a successful trader? Staying up to date with market news is vital. Many market movements are driven by news, central bank announcements, political events, or the expectation of any of these. This is what’s called fundamental trading.
Even if you are a technical trader, meaning someone who makes trades based on chart analysis of a market instrument, you should still pay close attention to the fundamentals, since such events are a key factor in market movements. For example, if you have a reliable trading strategy and several technical indicators that indicate a long trade, check the forex calendar anyway to make sure your order matches current events. Even if your technical trading strategy works perfectly, the fundamental news can change everything.
7: Avoid overtrading
Overtrading is the result of seeing opportunities to make money in forex where there really aren’t any. Some people who want to become traders look for opportunities to reach their goal, but on many occasions they may or may not realise they are deceiving themselves, and this wishful thinking and is putting their money at risk.
There are two common types of overtrading:
- Trading too frequently, and
- Trading with too much volume.
Trading too frequently, outside of scalping strategies, is a sure way to lose more money than can be made.
To explain why this can be detrimental, In this Warren Buffett speech entitled ” How to stay out of debt“, Buffett espouses the need for strict discipline when investing:
“In investments, you have to wait until the opportunity is clear, because the markets are not a game. In baseball, sometimes you have to swing at many balls that you don’t expect to hit, but this is not necessary in the financial markets.
There is no harm in waiting for more than a day for an opportunity to arise. You can simply wait until favourable price action arrives, and this shows that you really know what you are doing, and that is when you enter the game. You just need a couple of trades.”
When you’re thinking about becoming a trader, it makes sense to follow this same principle in the forex and CFD market. The lesson is clear: a trader does not have to make a lot of trades to be successful, they just need to make the correct trades.
When you are trading on a live account, you must have a strategy with specific, pre-established conditions for the entry and exit of trades. Simply follow your plan and do not trade on impulse. Trade carefully, and with a lot of volume
The other context for overtrading is to operate with too much volume. For many people, leverage is the culprit.
But is this true?
As we know, forex brokers and CFDs offer significant leverage in their trading accounts. In principle, this exists to give traders the opportunity to earn money in CFDs and forex with small investments. This gives more people the possibility to become Forex and CFD traders, and thus use the services offered by these brokers.
However, in practice, abusing high leverage is still very common among beginner traders who are tempted to maximise their profitability in forex. In reality, what they are doing is maximising their real loss.
High leverage does not inherently mean falling into error. Leverage is simply a tool that allows you to operate with larger trading volumes, resulting in the trades having a larger margin. This is a double-edged sword – if the market moves in your favour, your profits are amplified. If it moves against you, the same is true for your losses.
Trading with excessively high volume makes an account more susceptible to margin calls. The important thing is to learn to avoid overtrading and understand leverage. You can learn more about leverage, you can read all about it in this article, and empower your trading knowledge.
8: Accept that, eventually, you’re going to lose
Every trader wants to become a success. In reality, ‘success’ does not mean that you always win in each trade, but that the average across all your trades end up with a positive balance. Closing each and every one of your trades with a profit is simply impossible. Some professional traders may be consistently profitable on a daily basis, but none can show a trading statement that does not include a single losing trade.
If you lose a trade, do not despair. Some of the most successful traders with decades of experience have confessed that less than 40% of all their trades are profitable, and some even cite less than 20%.
The trick to being a successful trader is for the winning trades are profitable enough that they produce enough profit to cover their losses and maintain a net positive. Keep in mind that this is very common with traders who have participated in the markets for a long time. It takes a lot of mental strength to admit mistakes in decision making, and to close an order with a small early loss.
On the contrary, it also takes a lot of strength to trust oneself and not close an operation with benefits too soon. You need to be patient and follow the trend.
9: Develop a trading plan
There has been much talk about discipline in trading, but very little about being an organised trader. It all starts with your trading routine. You need to have a strict trading plan that covers most of your trading activity, which will help you reduce risk from unforeseen shifts in the market.
Many beginning traders develop negative trading habits. One example is the aforementioned overtrading, in which once a trader starts getting lucky and they continue to trade until they overdraw their account.
On many occasions, some traders have good trades due to chance or luck, which ends up reinforcing the negative habits in trading, resulting in it being nearly impossible to break these bad habits. How can this person become a successful trader if they repeatedly leave the result of their trades to luck?
Many traders believe that luck will not abandon them, but as everyone knows, luck is not infinite and one it runs out, it will create consistent losses. Therefore, it is important to reinforce healthy trading habits, as these will help you achieve your goal of becoming a successful Forex trader.
10: Choose a broker that matches your risk profile
If you are worried about the financial security or reputation of your Forex broker, it can be difficult to focus on your trading. If, on the other hand, you have confidence in your Forex broker, this will free up mental space for you to devote more time and attention to analysis and developing FX strategies.
Research prior to committing to a specific broker can go a long way, and can improve your odds of being a successful trader in the competitive foreign exchange market.
So who is the best broker?
The best broker is not the one that promises to help you become a successful trader. The best broker will have the best answers to these questions:
- Are they regulated by any government entity?
- Will your money be protected and insured?
- How will the customer service be once you open an account with them?
- Are they a good Forex broker for beginners?
- Do they have a good trading platform?
You should take time to research the best broker for you, as will find a lot of reviews on forex brokers and all kinds of online forex broker rankings. When it comes to online forex trading and CFD trading, as well as dealing with forex brokers and CFD brokers, you should always trust yourself, as deciding who is the best Forex broker and who is the best CFD broker will ultimately come down to you.
When it comes to our thoughts on the best Forex broker, we might be biased, but we think that Admiral Markets does a pretty good job.
Admiral Markets offers over 8,000 unique instruments to trade, with industry-leading offers in spreads, low commission, as well as negative balance protection to give clients the best possible experience and chances for success.
Over 100,000 traders have chosen Admiral markets as their broker, and it’s thanks to their continued faith in our product and offering that Admiral Markets has been given numerous awards.
Admiral Markets UK Ltd. is a regulated broker, and you can read reviews of the services provided on the FPA website.
Admiral Markets also offers extensive educational resources, such as free webinars where you can learn to trade from successful professional traders discussing market movements and the fundamentals of trading. Beyond the webinars, we also have an extensive library of educational articles for you to learn every detail, strategy, and fact about the industry and market.
So, if you’re ready to trade the live markets with Admiral Markets, you can open a live account by clicking the banner below!
Bonus tip: The importance of Forex education
The Forex market is constantly changing, so traders need to be able to understand the ups and downs of this market. There is no patterned formula or set of rules to guarantee success in Forex. Instead, it is a combination of many things all at once – and to succeed in this market traders need to be patient, talented and mindful.
Understanding this is the first step in Forex learning. If you are interested in beginning your Forex education, why not consider taking Admiral Markets’ Forex 101 course, so you can learn how to trade on Forex and CFDs with online lessons from experienced professional traders, completely free of charge.
Being able to talk about ratios, charts, indexes and trading should be regarded as a skill to aspire to when you start to learn about Forex trading. In the beginning, it can be tempting to rush through your learning, but it’s important that you step back, take the time you need, and advance at a sensible rate. You need to be able to constantly evaluate your performance, and understand the reasons behind your wins and losses. Now let’s see why should you learn how to trade Forex the right way.
Now that we’ve covered the basics, let’s take a look at the steps you need to become a professional Forex trader:
Professional Forex Trading Tips
Pro Step 1: Develop your trading strategy
The most significant step in preparing and protecting long-term participation in the market is to build your personal trading strategy and to stick to it. Once your feel confident that you’ve done enough research on the instruments and technical aspects, gotten a feel for the market with a demo account, and defined a realistic risk profile, it’s time to develop your strategy.
Whether you choose to be a forex scalper or long-term investor, the point of your strategy is to develop consistency and routine. As with every other trade, practice makes perfect. The deeper your knowledge and experience with an instrument or technique, the more you’ll be able to make more consistently successful and thoughtful decisions within it. As you grow as a trader, your strategy will likewise grow with you.
Pro Step 2: Do not overtrade on a demo account
Many people want to become Forex traders, but most never move beyond trading on a demo account. The truth is that, in order to become a successful trader, your trades should consistently be making you money. And the only way they will make money is if you are trading with real money on a live account.
For this reason, it is vital to switch to a live trading account as soon as you’re ready. If you’re going to use a demo account, your goal should be to use the demo account to learn the ropes, with the intention of switching to a live account once you understand how to trade.
For new traders who are trading consistently using their demo accounts, usually a month is enough time to understand the mechanics of the trading platform and to start becoming a professional trader.
It is advisable that traders should not postpone live trading for more than three months after they have started trading on a demo account.
Pro Step 3: How to Become a Successful Trader in Forex
Finally, once you’ve established your trading strategy, and switched to a live trading account, you should move on to the next step—or steps, rather:
- Develop a trading plan and always adhere to it.
- Set stop-losses for every trade. Otherwise, failure is almost certain.
- Don’t risk more than 2% of your margin per single trade.
- Keep your emotions separate from trading.
- Never trade to compensate for your losses.
- Only trade when you feel it’s the right moment.
- Don’t be afraid of losses, every trader has them.
- Try to achieve more profitable trades, and have less unsuccessful trades.
This is the right path to follow in order to become a good Forex trader. You will be facing lots of losses and stress along the way, but don’t give up. With effort and passion, you can make up for any bad experience you may have.
If you would like to learn more about professional Forex trading, you can do so with any of our educational webinars – many of which provide you with the opportunity to learn about advanced trading psychology and candlestick trading in the Forex and CFD markets.
It’s not difficult to begin trading, and you can begin with a demo account from Admiral Markets within minutes. Simply create a Trader’s Room account, download and install the trading platform software of your choice, and begin trading! If you feel confident in your trading ability, you can instead go straight to a live account and upload your funds and start trading the markets in real time.
Being a Forex trader allows you to work from nearly any place with an internet connection. Hotel rooms, cafes, and—thanks to the latest technological developments—even more distant corners of the world. Forex traders are blessed with strong growth potential, and their lifestyle can certainly offer a lot of enjoyment. But if you’ve ever taken this path, you know this gift does not come easily. The sooner you start, the faster you’ll get there. So why not start trading now?
About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world’s most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
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