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5 good Forex trading habits

The foreign exchange market, also known as Forex, is full of traders looking to profit from the fluctuating exchange rates of foreign currencies. Whether you're a day trader or simply trade in your spare time, there are several simple ways to improve your success in this prosperous market. By engaging in five easy habits you can make the most of the market while remembering to protect your assets.

The first good habit a trader can engage in is to consistently stay within certain parameters with regard to risk and leverage. Your risk portfolio will differ depending on how much capital you are privy to, but it's always a good idea to set limits on the percentage of capital you can trade in a single transaction. For example, many traders don't allow themselves to spend more than 1 or 2 per cent on a single trade as a way of protecting their capital. Risks are a necessary part of any type of trading, but it is important to have a clear idea of how much you are willing to risk. By knowing this number ahead of time you can avoid making rash decisions based on gut reactions. Furthermore, it is also a good idea to set a limit on leverage. Though using borrowed money can allow you to trade more flexibly, leveraging too much of your capital can be a dangerous game. It may be a good idea to limit your leverage so that it only makes up 1/5 or less of your total capital.

Secondly, it is important for Forex traders to stay up to date with finance news and remain aware of the general condition of the economy. To improve their trading strategies, Forex traders can get into the habit of reading newspapers, blogs, books and reports on global economies. Forex traders that make good use of resources are able to stay ahead of the market and predict when potentially lucrative fluctuations may occur.

The third good habit of a successful Forex trader is to diligently record all transactions so that their personal trading behaviour can be analysed for areas of improvement. You can use a Forex money management spreadsheet to keep track of your transactions and to stay informed of your gains and losses. Day traders in particular can easily lose track of earnings and losses if they do not keep organised, detail records.

Though it may seem obvious, the fourth habit of a successful Forex trader is to keep all your technology up to speed. For example, traders with slow Internet connections lead to misinformed trades based on old currency quotes. Delays are the kiss of death for a Forex trader and it's essential to make sure your computer and Internet connection are functioning at the highest possible level.

Finally, the fifth habit you can practice for Forex success is to have a regular trading routine. Traders who have a consistent trading regimen are more likely to avoid overtrading and overanalysing the market - both bad trading habits. You can have a weekly or daily time period to make trades and stick to it.
As you can see, the good habits of a forex trader aren't complicated or difficult to engage in. However, these five simple practices can be extremely important ways of ensuring proper money management and optimal market analysis.