There are many factors that determine profitability for Forex traders. It is difficult to pick one factor that will lead to a profitable experience in the Forex market so many traders will look for patterns that will predict a successful trading strategy. These patterns will hopefully guide Forex traders towards great decision making and profitable Forex trades.
Let’s examine some of the patterns that have been seen in successful Forex trading.
Pattern #1: Mitigate your losses
The first important pattern to note is that no matter how many of your trades are successful, if you are losing more on your losing trades than you are gaining on your winning trades, your Forex trading will not be profitable. This is a very common occurrence in Forex trading.
To see significant profit in your Forex trading you need to make sure to use stops and limits to mitigate your losses. If you keep your risk to reward ratio at 1:1 or higher, you can limit your losses per losing trade. This can make a tremendous difference in your overall profitability. Making sure the amount of your losses is less that the overall amount of your profits is essential in profitable Forex trading.
Pattern #2: Range trading
Another pattern to watch is range trading. During periods of low volatility, range trading is most successful. If you want to use a range trading strategy successfully, one of the key elements is to know where to find that low volatility.
n addition to knowing which are the least volatile pairs, knowing the right times to trade is exceptionally helpful. The market is quiet when most of the traders are sleeping. That means that the least volatile and most successful range trading hours are the hours when only the Asian markets are trading
Knowing that the beginning of the trading week tends to be the most volatile also helps Forex traders to make their range trading more successful.
Pattern #3: Use leverage
Using leverage conservatively is another pattern of successful Forex traders.
As we discussed earlier, one of the common problems is when the amount lost in losing trades outweighs the profit in successful trades. That is often a product of misusing leverage. When used correctly and safely, leverage can be very helpful in increasing profits.
igh leverage and high volatility can become very costly very quickly. Risk management is key to successful Forex trading. Knowing that you should never risk more than you can afford to lose is extremely important.
Pattern #4: Monitor any breakouts
Stalking breakouts has also proven to be a profitable pattern in Forex trading. Those traders who understand that the European and North American trading hours are usually the most volatile and watch during those hours for breakouts tend to be very successful.
It is important to know what are real breakouts and which are false breakouts when using this strategy. Watch carefully to be able to determine which breakouts are the ones to trade.
Clearly these patterns aren’t an absolute guarantee of successful Forex trading but it is certainly a good idea to aim to repeat successful patterns and watch for those that have been detrimental to your demo trading as you prepare your actual trading strategies.