In foreign currency trading, the initial goal is easy: to trade for one more day.

Opening an account and putting real money on it’s the simple part. The challenge is to remain afloat long enough for you to accumulate the abilities and experience needed to change into consistently profitable.

So how do you recognize whenever you’re on the correct track?

Does a negative balance mechanically mean that you just suck as a trader? What number of trades do you’re thinking that are needed before you HAVE to indicate profits? Do you have to panic whenever you’re on a losing streak?

Should you freaked out over the questions above, don’t. Keep in mind that losing is as much a part of foreign currency trading as winning. Nevertheless, a stream of losses or a consistent lack of profits may very well be an indication that your trading process needs tweaking.

Listed below are five questions it’s good to answer to assist discover your problem areas:

1. Are you committing classic trading mistakes?

Humans have the tendency to think that they’ll be the exception to the rule. People buy lottery tickets believing that they’ll win the large jackpot prize. Others buy houses near fault lines pondering “Eh. There won’t be any earthquakes while I live here anyway.”

Forex traders aren’t any different. Though they’ve been warned that greater than 95% don’t survive their first months, some are still overconfident enough to think that they’ll be resistant to the classic trading mistakes.

Don’t be afraid to examine for those who’ve committed one in all them. Whether it’s the fundamental ones like not setting stops or psychology-related ones like lack of emotional control, it’s higher to confront your trading problems as early as you’ll be able to.

2. Do you have got a trading system?

How do you choose your trades for the day? Do you trade the primary currency pair that catches your eye? Do you choose essentially the most colourful indicator and buy/sell in response to its signals? Which period frames do you often have a look at?

Trading with out a system is like pushing random buttons in a game controller, hoping that you just’ll hit a winning combo. You might win, but you won’t know the way you’ll be able to do it again.

A trading system will go a great distance in helping you change into consistently profitable. Should you don’t know easy methods to construct one, then you definitely can start by simply identifying your entry and exit parameters.

3. Are you managing your risk exposure?

Does your average position size match your risk tolerance? Are you taking setups with a very good reward-to-risk ratio? How much every day loss are you able to sustain given your leverage and margin levels? For individuals who are winning trades but are still not earning money, are you keeping track of your trading expectancy?

Don’t forget that trading without risk management is gambling. Ultimately, foreign currency trading is a numbers game and those that know easy methods to benefit from favorable odds are those that survive the longest.

4. What does your trading journal let you know?

You possibly can’t improve what you don’t measure. Trading journals not only let you know where your weaknesses are, however it also prevents you from reverting to your old habits and repeating your earlier mistakes. It keeps you measure, track, and stay focused on improving your performance.

What you set in your journal depends upon your personality, but you’ll be able to start with basic ones akin to your motivations, market views, trading mistakes, and general statistics. Consider asking other traders for those who’re undecided which performance metrics matter.

5. Is foreign currency trading for you?

Perhaps the explanation why you’re not earning money trading forex is that currency trading is just not for you.

It could be that you just find currency trading an excessive amount of to your risk tolerance. Or possibly macroeconomic events don’t really interest you. It might also be that you just’re so used to trading other assets that you just don’t care much for currencies.

In any case, there’s nothing fallacious with turning your back on foreign currency trading for those who feel that it’s not for you. In truth, we’d relatively see an informed investor quit foreign currency trading than an eager one who’s just in it for the cash.