The highest daily global currency turnover ever recorded in the history of the foreign exchange (forex) market was $6.6 trillion. It happened on September 16, 2019, in London’s Bank for International Settlements, the world’s preeminent forex trading hub. Fast-forward to 2020 and FXCM reports that this turnover rate has settled down to just over $5 trillion per day, noting that the forex market remains not just the largest but also the most liquid market on the planet. While a passion to get in on this action is crucial to success, it’s also important to develop certain key habits that can help you along the way. If you’re a newbie entering the global forex market, here are four habits that you should start practicing today.
Planning and Documentation
Mark important economic events in your calendar. Set your Google Alerts to keep you notified on any relevant news about the forex market, the currency pairs that you’re trading, or whatever niche you specialize in. Take note of any potential significant movement and plan accordingly. In a volatile world, it pays to have well-informed plans when you’re operating in the most liquid market on the planet.
This includes taking note of your own trade decisions in a journal. Make a record of stop loss amounts, breakthroughs, pitfalls, and any information that can help you develop your own trading framework. By measuring your performance in the market, you can see how your past decisions have affected your progress. It’s up to you whether you want to do all this on paper, digitally, or a combination of both. What’s important is to stay informed, record your progress, and have references for developing your framework.
Always Set Stop Loss Orders
Stop loss orders —more commonly known as stop losses— allow you to exit trades once you reach a certain price level. It’s a simple way to limit how much you lose per trade, which is what stop losses are regularly used for. The Balance notes that you can also set what’s known as worst-case stop losses, which is for when you want to manually exit trades to chase newly arising conditions and opportunities, but are unable to do so for whatever reason —at which case a worse-case stop loss would automatically exit your trade as soon as you reach your price limit. No matter how confident you are with any trade, make it a habit to always set stop losses.
Stick to Your Niche
If you’re new to the market, it’s more important to specialize rather than diversify your trading. Stick to one or two currency pairs and study every bit of relevant market info you can find on these currencies. It’s easier to figure out how to develop your trading strategies and framework when you have fewer options in front of you.
Stick to a Daily Time Frame
We’ve previously covered how reputed trading firm Forex Broker Australia tells traders to always consider the higher time frame when making trading decisions. This entails employing a daily time frame trading strategy, which will allow you to better see the patterns and averages that affect the higher time frames of whichever currencies you’re trading. Sticking to a daily time frame helps in developing your framework as well as the natural perspective you need to thrive in this market.