Almost every forex trading beginner wants to grow their account, while losing as little money as possible to reach their end goal. However, it’s important to bear in mind that this is not an easy goal to achieve, yet it can be done if you’re willing to be disciplined – as there isn’t one singular method to achieving these results.
That’s why, in this post, the experts at Learn to Trade are offering their practical advice on how to quickly grow your forex trade account. From understanding the risk-to-reward ratio to trading at the best times, we’ll cover it all – so that you’ll stand in good stead for reaching your financial goals in no time.
Understanding risk-to-reward ratio
The risk-to-reward ratio is an effective tool for helping investors manage their risk of losing money on trades and measures the potential reward for every bit of currency a trader risks – so, for example, if you have a risk-to-reward ratio of 1:2, this means you’ll be risking $1 to make a potential $2. Typically, it’s recommended that the risk-to-reward ratio should be a minimum of 1.5. To be a profitable trader, you’ll need to use at least one as your minimum ratio, which would translate to a 50% win rate. However, with a 1.5 minimum ratio, you’ll need a win rate of over 40% to be profitable. So, the extra 10% gained using this method is detrimental to the money you make on your next trade.
When it comes to chasing losses, using a 1.5 ratio, you’ll only need two win trades for every three losses to cover any financial deficits, therefore, there’s less pressure to win every trade. After all, the more composed you are while making trade decisions, the more likely those decisions are to be successful as they’re not made on an emotional basis but on a strategic one. Protecting your capital will mean that you’ll find your account growing much faster, and you’ll have more patience for calculating your next move.
Build your confidence as a trader
The best way to build confidence is to ignore profits – for now. Instead, place all focus on mastering simple trading strategies such as price action and use forex indicators to ensure your trades are good ones. The more focus you place on your decisions, the more efficiency you’ll build and the quicker you’ll be able to calculate bigger moves in the market.
To do this, create a trading plan that will aid your goal of steady success in long-term markets. A plan will mean that the end goal is always on your mind and you’ll have a guide to follow in regards to day-to-day trading, including a manual for money management and entry and exit strategies.
Track your progress
To monitor your actions further, track your progress in a forex trading journal. Using this means of tracking your trades and actions, you’ll be able to see exactly how you came to your conclusion while ensuring that you stay disciplined and accountable for your decisions. Additionally, by keeping a trading journal, you’re more likely to reach a calculated decision and learn from possible mistakes as, after all, this information will be at your own disposal whenever you need it.
A journal is an effective reference in the event of a success or failure, to determine what you could improve on in your next move. A trading journal is a great motivator to stay disciplined and focused on the end goal – building efficiency and speed in the process. Although these methods may seem long-winded, they are sure to make big returns as you become an experienced forex trader and start trading with larger funds.
Be time frame savvy
Multiple time frame analysis is the process of looking at the same pair at the same price, but on different time frames. It’s essential to remember that the same pair exists on several different time frames, daily and hourly. Consequently, forex traders across the world could have completely different opinions on the market, and both be correct.
By observing multiple time frames, you’ll be able to find more trade setups, which will ultimately lead to better informed trade decisions. If you’re still unsure on time strategy and would prefer to take a look beforehand, use a demo account to experiment with your knowledge.
Using a top-down analysis, it’s easy to improve the odds of a good trade. It’s essential to identify support and resistance readings as well as strong entry and exit levels to improve the chances of financial gain. While trades aren’t always profitable, this is a great habit to adopt when it comes to growing your forex account.
We hope that, with our tips, you’ll be on your way to maximising efficiency and speed in your trade decisions and, in turn, grow your forex account. One of the most crucial steps to achieving results is ensuring that you’re observing the market correctly first, so be sure to do your research and try out new strategies until you find one that works for you.
Author Bio: – John James is a content writer for Learn To Trade, the foreign exchange education and learning specialists – offering a range of training courses to help people understand the currency trading market, as well as its opportunities and risks.