Top 5 Foundational Principles for Online Forex Trading Success written by: TrillianG 


 
As any successful foreign exchange trader would tell you, online trade is both science and an art. In other words, while you can pick up books or attend classes to learn all about the charts, jargon and graphs, the art of foreign exchange trading can only be mastered with practice and discipline. Bookish knowledge has limited role in this highly specialized field, as only those who constantly adapt and hone their skills can profit from this rewarding career

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Success as a foreign exchange trader is built on certain foundational principles. Once you have a strong grasp of these principles, and diligently work upon them, you would be well on the way to a successful trading career. Remember, because trading is always emotive in nature, one of the basic focus of foundational principles is to understand your personality.


Let us, then, take a look at the 5 basic principles of online foreign exchange trading.


1. Know your trading goals: Are you planning to trade online as a hobby or do you have plans to transition as a full time trader? These questions would help you answer the resources you should ideally commit to your trading endeavor. All of us are constrained in terms of our resources, whether it is money or time, and, as such, we have to be wise about how much of it we are willing to allocate to trading. Your eventual trading goals will further affect your risk appetite as a trader. For example, as a full time trader, you would have a larger appetite for risks, and you would be willing to take open positions overnight that are simply not feasible for a hobbyist. Knowing what you want from online trading clearly and unambiguously would help you act decisively and strategically to your long term benefit.


2. Know what works for you: One of the most confusing aspect of online trading is that there is no one hard and fast rule that works for everyone. There would be 10 successful online traders who will swear by their own different trading methodologies. The best you can do is to settle on one trading methodology that you are comfortable with and stick to it.


3. Don't let losses make you panic: Losses are, quite simple, part of the game in online trading. You have to simple develop an appetite for them and diligently work to make sure you do not react emotionally as a consequence. If you cannot prepare yourself psychologically to handle occasional losses, trading may not be the right field for you. The best you can do is to learn the right lessons from your trading losses and work to eliminate them going forward.


4. Test your trading strategies: One of the best way to boost your trading performance is through testing your trading strategies. These tests can tell you if your trading strategy can yield consistent profits over a long period of time.

5. Carry out periodical review: Periodically reviewing your trading performance provides you a lot of key information. You will get to know how closely you followed your trading strategies and whether the deviations, if any, resulted in profits or loss. You would also notice if you were disciplined enough to stick to the maximum limit on a single trade. Reviewing periodically instills a sense of discipline that is crucial for long term successful trading.