What to focus on when trading forex

It’s easy to get distracted when doing any task but this is particularly true when it comes to forex trading. Trading forex requires intense concentration and if you work from home it can also be a lonely profession. Even in a trading room, there is not much need for human connection since traders tend to spend their time focussing on the charts.

The difficulty is that humans have notoriously short attention spans (around 26 minutes). It’s therefore important to train your mind to focus at certain times so you can spend your energy at the right moments. Making sure you focus on the right things is crucial and will save you money in the long run.

Price action

The main thing to focus on is of course the price chart. You need to be able to notice small changes in price action so that you can react to them as they happen, and not the other way around. This also relates to how you have observed price action patterns play out in the past. You need to be able to identify the patterns that lead to profitable trades.

Back-testing

Studying price action is the first step every trader must go through in order to become a successful trader because it is this that will form the basis of any strategy or system that can then be created. You can’t create a winning trading system if you haven’t watched how the markets behave for a few months/ years.

But once price action has been studied, it’s important to focus a large amount of time on back-testing. Only then will you have the confidence and tools to follow the strategies that exist in your head.

Stop loss and target

The moment a trade is placed is the time when your focus must surely go up a notch. At this time, it’s most important to focus in on your stop loss and your profit target. If the market is moving erratically you will want to make sure your stop loss and target are in the right place. Risk needs to be managed like this in a constant fashion.

Exit rules

Many traders spend all their time fussing over their entry signals but exits are equally important so you should focus a lot of your energy on working out strong exit signals and finding ways to maximise the profits from your trades.

Education

Finally, it’s important to focus on continuing education. New technology and new techniques are constantly coming into play which means there is always more to learn. Books, blogs, social media groups – all can be used to learn about the markets and ascertain how they operate.