5 Tips for Making Consistent Profit in Forex Trading
Making one or two profitable trades is not a big deal in Forex. Anyone can do that and most of the time it is possible because of sheer luck. But one difference between gambling and trading is that in trading, there are ways to make a consistent profit. This is not possible in gambling because the very system of gambling is designed to make sure that you don’t make a consistent profit. But do all traders make consistent profit in Forex? For a lot of new traders, making a consistent profit is a big challenge. Most of them can’t figure out how to earn a regular monthly income in Forex. This article will help you out with 5 important tips to make consistent profit in Forex.
1. Trade Forex with passion
There are two types of traders in the world: Traders whose only motivation is earning money; and traders who trade because they like trading and are passionate about it. When you do anything just because you enjoy doing it, it is called intrinsic motivation. An action done out of intrinsic motivation is not a means to an end but an end in itself. The first step towards getting consistent profit in Forex trading is to trade with intrinsic motivation. When you enjoy the work you do, you really do not feel the burden of the work. It also reduces stress to a great extent. Above all, trading passionately ensures that you will always look for ways to improve your trading.
There is another problem when your main focus is just on making money. It could mean that you are greedy, which could cloud your decision-making skills. Often, people make stupid and hasty decisions because of greed. This will certainly cause emotional issues and will interfere with your goal of making consistent profit in Forex trading.
2. Reduce your Losses
Successful Forex trading depends more on reducing losses rather than making a profit. Because, when you limit your losses, it automatically ensures that you are more profitable. Sometimes, just one losing trade can severely erode your capital if you are not careful. There are many ways to reduce losses. One way is to not take a trade when you are not too sure. If you do not see a clear indication of good trading set up, don’t take the trade. Also, do not hold on to a losing trade. If the trade is losing, holding on to it without a valid reason will make you lose more than you deserve. Use trailing stops to your advantage. Try to partially close the winning trades and move the stop loss to break even to lock in the profit.
Often, losing trades are caused more by a vicious cycle of negative emotions. One losing trade may lead to another losing trade because of desperately trying to recover the loss and being down because of it. This may lead to a losing streak that brings more negative consequences than expected. So, good emotional management is one of the keys to reduce losses and make a consistent profit in Forex trading.
3. Do not risk more than your limit
One of the reasons why people lose more money in a losing trade is poor risk management. You always need to know your risk tolerance. How much money you can afford to lose is something that you need to carefully decide before every trading decision. Good risk management is like a shield of security to protect you and a helpful device to make consistent profit in Forex trading. It is a good practice to not risk more than 2% of your balance. It is true that risking more gives more profit but it also causes loss of more money when your prediction goes wrong.
It is also recommended to set a loss limit at the beginning of each month. If your losses exceed the set limit, we strongly recommend taking a break. Go through your trading journal, find out the reasons for your losses and learn from your mistakes.
4. Do not Overtrade
In Forex, taking more trades means you are also trading less accurate trading setups. But when you make less number of trades, you will naturally choose the more accurate trade setups over the less accurate ones. That is why traders even say that less is more in Forex. There are times when there are absolutely no trading setups in the market. You will be better off trading when the market is more volatile and liquid.
Overtrading is one of the common problems found among new traders. They are under the illusion that more trades translate to more profit. But knowing when not to trade also means you do know when to trade. By missing out on a trade that doesn’t look promising, you actually avoid losing money in that trade. But make sure that this decision is not motivated by fear. Because then it may become a missed opportunity rather than a loss that was avoided.
5. Focus on long term performance
Making consistent profit in Forex is different from making a huge profit in one month and losing it all in the next month. Many traders have an inconsistent performance record because of focusing too much on short term success. But Forex trading is based on long term performance. You may have bad days, bad weeks or even bad months. Accepting this as a fact gives you a lot of clarity on how the market works.
So, do not try to make a huge profit in a short period and do not get discouraged when you see losing streaks. No one can become rich overnight and Forex is not a get-rich-quick scheme either. If you want to make a consistent profit in the long term, you need to slow down and have a lot of patience.