Most people decide to start the New Year with special New Year’s resolutions. While it has been statistically proven that most resolutions do not last very long, it is a good idea to review the past year and understand why those resolutions have been made. It can often point out areas where improvements are required.
Today is the first trading day of 2014 and forex traders may want to think about areas where their trading needs to be improved in order to generate better results. A good trader understand the importance of making minor adjustments in order to increase results as no trading strategy is perfect.
Here are some areas you may want to consider:
Entry Levels – Take a look at your entry levels as this is one of the biggest areas of necessary improvement for most forex traders. Check you trading history and see how often you entered a trade too early which resulted in smaller profits or your stop loss order being triggered and you were forced to accept a loss. Look back at the charts and your entries and then calculate by how many pips you entered the trades too early, calculate the average and then start adding it to your next trades. For example if you have entered each trade by 30 pips to early on average and you are ready to enter your next trade in the EURUSD at 1.3800 enter it at 1.3830 instead. Compare the results after three months
Exit Levels – Since entry levels are one of the biggest areas of improvement it is only natural that exit levels are a close second. Follow the same approach as above and see where and how you can improve your exit strategy as this would increase your profits. It is a good idea to use a stop loss order to close trades for a profit. You can place a stop loss after you have earned a certain amount of pips in order to protect them. For example you are long the EURGBP and are earning 90 pips right now; you may want to place a stop loss order so you can guarantee 75 pips in profits. A floating stop loss order would be a good idea here as well.
Lot Sizes – Plenty of traders tend to trade lot sizes which are not appropriate for the size of their trading accounts. Evaluate your current approach and see if it fits within your overall risk management profile and trading strategy. Should you determine that you get stopped out of trades to soon you may want to lower your lot size in order to avoid premature exit of trades.
Discipline – This is one of the biggest hurdles to success as a forex trader and you should always improve your trading discipline. Look back through your trades and determine how many of them were traded according to your strategy and how many you added because you acted too fast and were not disciplined enough.
The above are four elements of trading which often need constant monitoring in order to make minor but necessary adjustments to your trading approach. Those traders who carry them out usually increase their trading efficiency, consistency and profits over the long term.