Tactics for Maximizing Online Trading Profits

Tactics for Maximizing Online Trading Profits

So many traders focus on protecting their capital accounts and avoiding losses that they forget to employ tactics that can maximize returns on their initial investments. There are, in fact, all kinds of strategies for earning profits on equities, forex, commodity, and other asset classes. Particularly for forex enthusiasts, the recent economic turmoil has opened up unique opportunities for earning solid returns. That's partly because the international currency markets are somewhat shielded from the vicissitudes of the rollercoaster stock market.

Forex traders buy and sell, going either short or long, with equal ease and confidence. Anyone who puts money on the line in a shares or commodities account enjoys no such luxury unless they subject their capital to strict margin requirements before shorting a stock or similar asset. What are the specific techniques that can serve modern forex and most other varieties of traders during the unpredictable years of the early 2020s? The following approaches apply more to forex markets than others, but the general concepts can work in several arenas.

Follow the Heat Maps

Heat maps are relatively new tools compared to the dozens of other strategies, methods, and software products available to modern account holders. For those who buy and sell foreign exchange currency pairs, heat mapping can turn an otherwise complex chore into a relatively simple one. The heat charts show, based on a color-coded system, which currencies are rising in value and which ones are getting weaker. All it takes is a quick glance at the mapped pairs to see their relative power against each other. Daytraders rely on the technique in order to make quick decisions about which pairs are moving quickly in a certain direction.

Use Tested Signal Providers

For those new to the FX arena, signal services can serve as a temporary decision-making tool. There are hundreds of online providers, most of which are untested and of little value. However, several are quite good, publish their trading history, and offer at least one free signal per day. To gain access to their premium services, which typically deliver up to 10 signals per day, be ready to pay a monthly subscription price. One way to diversify is to use multiple providers and combine their signal calls into a strategy that suits your needs. Many people prefer to trade only the major pairs and thus look for signal services that focus on those currencies only. Others prefer to view more than a dozen signals per day and choose the ones that appear, based on additional analysis, to have the most likely chance for success.

Use a Respected Platform

Rule one for getting the most out of an investment in a trading account is to work with a respected brokerage firm that offers a choice of simple and complex platforms. FX enthusiasts should seek out a reputable broker that has the best forex trading platform in the market. Whatever your opinion is about the options available, don't put capital at risk by dealing with brokers who have no track record, offer sub-standard platforms, or have little experience in the business.

Study the Big Picture

Whether you're a day trader, scalper, swing, or long-term trading practitioner, it's imperative to understand the general direction of the overall market or asset class you're buying and selling. In FX, there are all sorts of excellent online resources that offer trend analysis for major and minor currency pairs. These types of studies typically reveal an up or down trendline, information that can be extremely helpful for giving a feel for a given currency.

Use Stops

Stoplosses are specific numerical parts of a transaction order that instruct the brokerage system to take you out of a trade when the price reaches a certain point. If you buy the pair EURUSD (which measures the number of dollars per euro), a declining chart line means the euro is getting weaker. Someone might buy at 1.10 and set a stop-loss point at 1.00. Then, if the euro falls to the 1.00 level, the trade would automatically close, thus protecting the holder from further deterioration of their position. Stops play a unique role not just in FX but in equities and most other types of transactions.

So, how can stops help to maximize profits if all they do is prevent larger losses? The trick is to use a variation called trailing stops. Account holders can set their software to automatically move the stop up as the price rises. In the above example, if EURUSD advanced to 1.25, a trailing stoploss order would move the stop to the 1.15 point, thus locking in some of the gains. Trailing is an effective way to both protect against loss and retain a portion of any gains simultaneously.