Forex trading requires a specialized knowledge and skill. Each trader will ultimate develop their own trading style and strategy. As you gain knowledge and years as a Forex trader you are bound to pick up a tip or two to add to your trading arsenal. Consider these 12 Tips that I feel every Forex trader must know. Your ultimate goal is to be a successful Forex trader as you read through these tips consider how you can use them to advantage.
Tip #1: Education is the Leverage You Need
Forex has become the largest liquid financial market worldwide. It has no particular location, as exchanges are made by means of electronic network; in essence the entire world is involved in it.
Forex is not a highly sophisticated market, but you must take into consideration certain aspects if you want your trades to be successful. You can really earn great amounts of money, the way many people have done it and got rich in what seems like overnight. At the same time, you should always keep in mind that risks are involved too. Forex is a high risk high reward investment. And regarding that point alone, it is necessary to get properly educated and have the adequate knowledge about Foreign exchange trading before you start actually trading.
There are many avenues to learn to trade in the markets. Many of the business schools across the United States have courses on financial trading and markets. There are also Forex trading classes or seminars not affiliated with a particular business school that have a great reputation at developing great traders, and in the more recent years, there are many online trading educational schools in which you can learn the art of trading. Attending such courses will only benefit you, as they provide you with the required knowledge and skill to enter Forex market and trade successfully in there.
It is never recommended to dive into the markets without proper knowledge. A lot of Forex traders are self-taught. But typically with being self-taught come years and years of defeats. Obtaining a formal trading education lessens your learning curve.
A good trading school will teach you about properly reading the charts and correctly spotting the trends. Reading a chart allows you to have an overview on the direction a certain currency is heading to. You need to be able to accurately interpret the charts so you will be able to decide on the currency you will trade. One of the most basic but important skill to learn in Forex is reading a chart correctly. It helps you lower the risks of losing your money and increase your earning chances. It’s the most basic skill but it’s one that trips a lot of newbie traders up. So, it is well worth it to study charting diligently this will increase your trading tremendously.
When deciding on a particular school, you should consider those providing real-time trading on demo accounts and even live accounts. It is a fact that the best learning comes out of experience. Therefore, you should be required to create both accounts. You need a demo account for practice and a real one to actually trade. While practicing you get experience. You will better know the way the Forex market works, which will help you when you decide to trade live in the market.
Various trading systems should be available in the school you choose, so that you can try them and decide which speaks to your particular trading style. Even more important, you will get acquainted with the way these systems work and are used, for the same purpose of avoiding mistakes on your live account.
Due to the fact that it is largely based on speculating, Forex is a risky market. You must have proper knowledge of the market, and be skilled to trade in it. You can earn money very easy, but at the same time you can lose it just as easily. I hope you can understand why it is very necessary to get properly educated before starting to trade in this market.
Today anyone owning a computer and having an internet connection can trade in the Forex market. You should keep in mind the fact that even with education one still cannot guarantee winning for everybody. The better knowledge you have, the better your chances will be to gain profit in Forex trading. You should not attempt to trade real money if you only think you can do it. Get educated first.
Tip #2: Choose the Best Education Platform to Learn How to Trade Forex Effectively
It is commonly assumed that Forex trading is only for commercial banks, state bank, investment companies or in short for large governing bodies. But this is not true. Any common individual can trade in foreign exchange market. They just need sufficient capital to invest and an active account with a Forex broker.
It is common practice in Forex trading to buy the currency at lower price and sale it at relatively higher price. This is the basic concept of the Forex market. If you want to get involved in the foreign exchange market, you will not get very far with only the basic knowledge alone. You need to have complete knowledge of the Forex market to become ruler of the market.
Forex trading takes place 24 hours a day 5 ½ days per week, this means that trading is even going on when you are busy in your office, doing your daily routine and even when you’re sleeping. You need the knowledge of trading via the internet through a broker platform.
One of the great features of Forex trading is that most brokers will allow you to set a buy or sell limit to execute a trade at your desired level; your currency will be brought or sold automatically at a set price when the value of the currency reaches at the predetermined price level that you choose.
Do not be afraid of large giants like commercial banks and professional speculators in Forex market. There are brokers in the market who work for retail traders such as yourself, and give you proper guidance.
It is necessary to learn Forex trading procedure first. It is your primary obligation to learn the rules and regulations of Forex trading. Education is stressed so heavily because a proper foundation will help you to minimize risk. It is highly advised to have proper knowledge about the market before entering into it.
It is essential to learn psychology of Forex trading. You should also know how to diversify your capital investment portfolio in order to reduce risk. It is advised do not make huge capital investment in one currency alone; instead make investments in many small units. It will not only minimize risk factor but also help you to compensate the loss in one investment unit by making profit in other.
If you are a newbie in this speculation game and you make a lot of profit at the start, then do not overestimate yourself. You should be more cautious as this is an exception and not the norm; profits may not come as quickly all the time. Do not neglect risk factors. Keep your ears and eyes open and stay abreast in this market. Do not consider yourself an expert speculator but indulge yourself in continuous learning process. Continuous learning is a HUGE factor as to having success in Forex market.
If you entered in Forex market with the aim of getting success, then take the help of experts in this field. Learn the strategies and tactics to deal in Forex market. Take trades in a demo account before investing your hard money in the FX market, gaining trading hours will help you to become an expert.
Also, learning as much as you can about the market trends will give you a trader’s edge. You can also work with brokers to enhance your learning.
Tip #3: Learn the Basics of Forex
There are many large companies which are trading in this market after all again, it is the most liquid and volatile market, and gains can be made whether you long or short the currency. If you like to adopt a trading career, the Forex market is the best place to invest. Unlike many other stock markets Forex trading is the most appropriate place to invest because it operates 24 hours a day 5 ½ days a week. It is global and you can also trade through electronic media such as internet or with your mobile phone.
For those who are new to Forex trading to put it simply, you are buying and selling currency in pairs. But it is not as simple as it seems. It involves lot of technicality. You need to learn a lot about Forex trading before you begin market trading.
Since obtaining access to the Forex trading market is not a challenge any more, you do not need to go to an actual foreign exchange market, you now have access to Forex trading via the internet. There are many Forex trading platforms available online, that will provide you with timely market updates, currency quotes, rise and fall quotes of the various currency values and so on.
It is recommended to gather as much information as you can before starting to trade in the foreign exchange market. You should begin gaining your trading edge that will enable you a better chance for earning more profit. It is easier to earn a living Forex trading when you combine education, practice and experience. To invest in Forex trading and rule over it is not a simple feat. The more you are in the Forex market daily, you increase your chances at becoming an expert trader in this market.
Although Forex trading is a big place to make money, it can become very expensive with one wrong move. This is why I am stressing the getting educated tip!
Since the Forex market is open 24/7 you can trade whatever time suits you best and you can get out of it whenever you like. You just have to anticipate the trend of the market if you are an aggressive trader or follow the trend if you are more conservative.
As compared to bonds and stock, Forex trading is riskier. It is the volatility that can help you make billions of dollars in few seconds. Just ask George Soros.
Forex trading is not only for large firms and organizations. This market is open for everyone. The only conditions that you may have is that it is best to have sufficient capital and you have to setup a demo or live account to deal in Forex trading. You can trade full time or part time. You can trade any time the market is open.
You should have the right systems in place to trade. Take free trial versions of any trading broker's platform before committing to one. Research the platforms by reading blogs and testimonials before diving in. The selection of an experience and well reputable Forex broker can provide you with lot of advice as to how to deal in the Forex market and how you can maximize your profits while keeping your risk to a minimum.
Knowing Forex trading terms is also essential. You cannot survive in foreign market if you do not learn its language. Like, an increase of one hundredth percent in trading currency is called a “PIP”. Volume means the quantity or amount of currency you are trading. Buying or going long refers the purchasing of currency. Selling or going short refers to the selling of the currency.
Learning the basics such as the terminology, the make up of a basic strategy, the different market sessions, most actively traded pairs, market hours and how to execute trades are some of the most most basic Forex information you should know.
Tip #4: Strategize Every Aspect of Your Forex Trading
Forex Trading is a place where potential investment players deal in business and financial activities.
Forex is the modern name of Foreign Exchange Market, $5.4 trillion USD is traded per day. In order to deal in Forex and make it big, you have to develop trading strategies to increase your chances of gains.
Of course the first strategy is to acquire complete knowledge about Forex trading. You should know all the tactics to maximize profit and minimize loss. It can be done when you completely familiarize yourself with market systems and players in the market. Major players in foreign exchange market are broker companies, the central bank(s) of the country, commercial banks, and investment funds. Individuals with large capital are also trading in foreign exchange market.
The main Forex trading market is the London market. Top trading currencies are United States Dollar, Japanese Yen, Euro, Australian Dollar, British Pound and the Swiss Franc. Forex is a speculative market, which means that, there is no trading of tangible goods in this market. Everything is virtually traded.
Most of the companies buy one currency against another currency having greater value today or tomorrow. Let's take an example, your speculative experience tells you that price of Euro will be higher than US dollar in future. Then you will go and purchase Euros with your US dollars. When the value of Euro will rise you can sell it or exchange it back to USD to earn profit.
Develop your trading strategy according to your trading type. This is important. Identify that which kind of trader you are. There are tests that can help you to determine this if you are unsure. A sound trading strategy minimizes risk big time. Practice, practice, practice proper money management. Do not invest of your all capital in one large trade. And most importantly DO NOT INVEST MORE THAN YOU CAN AFFORD TO LOSE.
You should diversify your portfolio of transactions in order to minimize loss. By allocating capital in many small transactions instead of one large transaction is a smarter way to go. If you incur a loss in one transaction you will lose only a fraction of your capital as opposed to having a margin call.
Demo trading is the most beneficial tool for practicing to trade in the Forex market. It helps you to learn the ebbs and flows of the market; it also familiarizes you with all the tools and software used in market. It allows you to get enough knowledge and practice to deal in foreign exchange market before dealing with real money in a live account.
Another strategy is choosing the right selection of broker in foreign market. Select the one who has complete Forex trading knowledge. The broker should be familiar with all the rules and regulations of the foreign market.
Tip #5: Pick the Right Currency Pairs
Having knowledge of Forex trading and the necessary skills to actually trade in this market are a must to become a Forex trader.
Still, having only education is not enough. There are other various aspects you need to be aware of if you want success to be granted and really earn money. Being informed about the main currencies traded and the trends they follow is part of the basics.
Choosing the proper currency and the most favorable time to trade those pairs, adds to the requirements for success. There are several strategies which can be used while trading Forex, and if correctly used, they can surely bring you serious amounts of money. As Forex differs from stock trading, the strategies you develop and use will also differ.
The leverage strategy in Forex trading allows the investor to borrow money for the purpose of increasing the potential of earning. It is among the frequently used strategies for profit maximization in the Forex market. But there is a high level of risk that can be involved. To minimize it stop loss orders are a must. You make use of them to reduce both risk and loss.
The strategy based on stop loss orders starts from a predetermined point, which once reached, will alert the investor and he will stop trading. It is mainly used for risk and loss lowering. Making use of it can track you down as well, as you might stop trading when currency value goes higher than you anticipated.
As Forex works 24 hours a day, everywhere around the world, you can trade whenever you think the market is at the proper setup for you to get profit. Being such a liquid market, you can join it and leave it at any time.
Tip #6: Get to Know Your Pair
As a trader I am sure you will try and trade a variety of pairs at different times of the day on different different frames. Most traders think they are doing themselves justice if they trade as many pairs as possible. I beg to differ.
Limit your currency pairs. Pick your most profitable pair(s) and concentrate on learning everything there is to know about that pair. Learn how consolidation looks for that pair, learn how the pair trends, learn the false breakout behavior of the pair. Learn how the pair reacts to fundamental announcements, learn how many pips on average the pair moves in a day, a week, a month. Learn if the pair have any correlations, learn the most active times for the pair.
Make the pair(s) your best friend. If you learn as many details as you can about your currency you will have a traders edge that will set you apart from other traders. This edge can literally lead to having months go by without a loss.
Most traders feel like they are maximizing their chances of winning if they trade as many pairs as they can. In most cases this can actually hurt your trading account. It is best to learn about a few of the pairs behaviors than to try and figure out multiple pairs.
Each pair have their own personality, their own behaviors, their own characteristics. You can actually be more profitable when you take the time to get in depth with a few pairs as opposed to having basic knowledge of many. You will take better trades, you will better see reversals, you will understand the trends better. When you decided on a setup you will have more confidence entering the trade and enduring the ebbs and flows of the market until your take profit is reached.
To better illustrate this point I say make your profitable pair(s) your best friend because more likely than not you know your best friends deepest darkest secrets. You typically know how your best friend will react in a certain situations, you know how much stress your best friend can take before their reaction goes downhill, you know what makes your best friend happy. The goal is to know your pair to the point of predictability.
Tip #7: Practice and Discipline Goes Hand and Hand
Trading Forex continues day and night, 5 1/2 days a week with many prospects for traders to make profit.
One thing that will make you a successful trader is PRACTICE. Practice makes you a better and more superior trader in foreign exchange market. And it’s worth pointing out that practice includes determination and dedication to deal with tough foreign exchange market conditions.
There are many online demo trading platforms offered from Forex brokers. It is advised to practice in a demo account before using real cash while learning the ropes and any time you change your trading strategy.
In Forex trading you can minimize risk but cannot eliminate it. If you are new in FX market, do not be afraid of losses. Losses are a part of the trading process. Losses will sort of force you to learn unique ways of earning profit. So, it is recommended to learn from mistakes and do not repeat these mistakes in future.
Discipline is the golden ticket for trading in foreign exchange market. Discipline will help you to make wise decisions about your strategies and help you to determine which of your trading habits should be adopted to multiply profit.
You should create and maintain your trading charts for evaluation of results. The charts will tell you what necessary adjustments should be made for better performance in future. This is known as trade review.
Do not feel defeated with failure; remember that failure is the first step towards victory. Learn from failure and do not repeat mistakes in future.
For example, if you suspect a currency pair will go down, and you did not take a short because you think the pair is due to rise in price again meaning you did not want to enter a trade “late”. Learn from that, so you do not make such a mistake again; sell the currency at the first sign of your anticipated trade setup trust in your trading strategy. That is how you would be able to decrease chance of loss.
Forex trading is one of the fastest trading markets, so for daytime online trader’s internet speed should be fast too. It will facilitate you to respond timely to quotes and trading updates.
For quicker online responses for execution and confirmation of quotes there is speedier online system called EDAT. EDAT has an additional feature through which traders can acquire and contact directly with trade specialists for captivating recommendation to solve unwelcomed market threats.
Another facility for day traders is that if they want to sell specific currency at desired price level, then they can set specific price for that currency.
When the value of currency will reach at their desired level than it is could be sold automatically when you are away or sleeping.
In short, if you want to be a successful day trader you need practice, discipline, dedication and immense effort. All these factors collectively will help to ensure profit.
Tip #8 Enter on the Right Trade Setup
To trade successfully in Forex, you must be able to understand the trading “signals” that can contribute greatly to your profits. Now when I say “signals” I am referring to trade setups.
Select a chart that describes these trading setups and rationally choose a trading strategy that can optimize the benefit of these trading setups. These signals can help in making important decisions regarding your market entry and exits by way of take profit and stop loss or when to make any adjustments in currency exchange.
Trading setups are the parameters in which you would enter a trade. Whether you use purely price action, indicators, volume, or some other signal having a predefined trading setup will help to alleviate anxious trading entries. Charts in Forex display continually updated exchange rates of various currencies, the upward or downward trends and the technical indicators. Every chart is being updated after a specified time period. You must be highly familiar with these charts and the technical indicators before you begin to trade live in the Forex market.
It is a sensible norm to consult the charts before making an entry based on the pair you plan to trade. You can even consult multiple charts to figure out the best time of entry. After mastering evaluating trade setups, you must pay attention to the exit “signals”. There are many options for exits from trailing stops, fixed stops and limit exits.
Shorting a pair is totally allowed in Forex. If you intend to make short trades, try concentrating on 'turning points’ also known as reversals by understanding any short-term pattern which can recur in the long run. Get to know the currency pairs to figure out any such swing. Usually traders prefer to set a higher percentage for a short period, opting for the limit exit.
You can also consider exit signals that are based on real time transactions. If you are abreast on the financials of a country you can use that information to your advantage.
In addition to consulting the technical indicators, you must use a setup that best suit current market conditions. Instead of making a decision randomly you must stick to a logical strategy. Try using multiple setups in accordance with your trading plan rules that will help you to minimizing risk.
Also evaluating various Forex setups along with technical indicators allows you to control your investment and anticipate the possible fluctuations in market.
Trading in Forex requires rigorous attention and observation and any negligence can cause big losses. Technological advancements have made it possible to analyze foreign exchange market 24 hours a day through the internet. You can even buy and sell currency on phone, because the need of physical presence has been eliminated with online trading.
Tip # 9: Be Obsessed With Becoming a Better Trader
If you are convinced that trading in the Forex market can boost your financial condition within a relatively short time and you have decided to jump in this vast financial opportunity, ask yourself 'Are you really ready?' Do understand that attempting to turn thousands into millions can possibly result in loss. So, make sure that you have got the necessary education and exposure to participate Forex. This means understanding at the very least, the basic concepts to the most intricate tactics of currency trade before taking that leap.
Online forums, articles and tutorials can provide a fair understanding even for beginners. For advance learning you can join a foreign exchange institute that have trained and experienced instructors who actually deal in currency exchange. These instructors have real-time market knowledge and can familiarize you with the valuable insights of Forex or join a trading room or even considering finding a trading mentor.
Another great option for experienced traders is to join a Forex mastermind group.
Creating a place in this huge investment vehicle, require enough confidence and capability to assess ongoing market changes. You can't always earn profits by following anyone blindly, no matter how successful that investor is in Forex. It is your own intuition and decision-making ability to buy or sell the right currency pair at the right time. Beginners are often called 'turtles' because of their inadequate experience regarding currency trade.
Your approach toward currency exchange matters a lot. If you're a keen observer and have monitored past trends and patterns regarding exchange of any currency pair, you are in a better position to avoid any possible loss. To unveil long term trends, use the breakout method, this is still the most effective way to to profit on such market conditions.
Trends in exchange rates, of currencies of developed economies, tend to be more stable. There are now a number of sophisticated software’s available that can analyze past and current exchange rates and can anticipate future trends. You must be able to read Forex charts and understand price action.
Entry to Forex means, sustainable attitude toward currency exchange. This means that you must act rationally even when you bear a loss. Instead of buying or selling haphazardly, make your moves strategically by considering long-term tendencies. Besides relying on Breakout method, you must hold your morale high even during down periods. Revenues cannot be generated endlessly in Forex without ever enduring losses so you must be mentally prepared for when losses occurs.
Aside from advantages gained from reasonable measures of risk management low risk can actually limit profits. There's a rule in foreign exchange market, the greater the risk, the greater the profit. You must decide what suits you best and must anticipate the right opportunity to buy or sell.
Just like 'too many cooks spoil the broth', a consensus on a certain move in Forex can end up in nothing. Use your intuition, technical analysis techniques, fundamentals, and any other trading indicators and decide rationally rather than just relying on rumors. By acquiring sufficient knowledge before an entry to and learning from real life instances, you can be very profitable with this enormous opportunity and earn millions of dollars. Just be a persistent trader, good observer and keen learner, you'll reap the benefits from this international platform.
Tip #10: Automate Your Forex Trading Account
Long gone is the time when only banks and private institutions could trade the Forex market. Now, individuals have access to trade their own money, and lots of it. We are known as retail traders. The exchange of foreign currencies has since been open to private investors, central banks and several countries. But now with the introduction of the Expert Advisor trading systems, the smaller capital trader can now automate their trades like the big companies do.
The systems allow the user to set their own parameters and trading guidelines. The program consists of software that has been developed for a specific type of trading style, not everyone trades the same. Some trader’s spot trade, some trader’s trade big, some trader’s hedge and so on and so forth. The developers of these types of software take into consideration any nuances of Forex trading as well as being aware that the market is trading around the clock, even during weekends.
Without these types of systems in place, the trader would have to monitor the pair that is being traded on a constant basis with that means; monitoring opening and closing times which are almost impossible to keep up with. By using the Expert Advisor, a trader can setup trading signals to make life a bit easier such as a type of order, stop loss, trade entry, etc.
Some of the key benefits of using an automated trading system is that it gives the trader full control, but cuts out the emotional bond a trader has with his money... making the temptation to enter or exit trade on a whim a lot less likely. This takes the guesswork out of trading if the trader implements the right trading signals for this trading style.
The EA is a mathematical algorithm and it performs solely on formulas, so if the EA doesn’t perform like it should it can be changed, augmented and tweaked until the trader finds the recipe for success that they are looking for. Then, this process is repeated constantly to achieve a money-making strategy.
Now-a-days if the Forex trading setups meet the defined setup rules, you can receive an alert to buy or sell your currency. Another way to try to ensure the maximum possible gain from your investment is to subscribe to a trading signal service of an experienced Forex signal provider. Make sure you are able to verify the provider through a third party such as Myfxbook.com. I like 1000pips climber you can read why here.
You must find out the best trading system that suits you. Logical evaluation of figures and signals allow you to grab the right opportunity. You must conduct a thorough research before making a transaction and don't just rely on one source.
Read reviews, online trading forums, business newspapers and magazines on foreign exchange to deeply understand the underlying system of Foreign exchange trading. Use software to evaluate signals or a method developed by any foreign exchange expert. Make notes to help find the right trading system that works for you and your trading style.
Tip #11 Find a Mentor
Finding a good mentor is like striking gold in the Forex market. The definition of a mentor is an experienced and trusted adviser. There is a statistic that says 95% of all traders are not profitable, finding a good mentor can help you be apart of the 5% that is profitable. Now I believe a lot of traders give up way to early in the game so these stats are flawed by the mere fact that traders give up.
A mentor will help you along on your trading journey. A mentor will help you to enhance your best trading habits and help eliminate your worst habits. Your mentor will be there to help you understand which part of your trading strategy is on point and what tweaks need to be made. Your mentor will also be a huge benefit to help you understand the psychology of the market and how to view the market in a different lens when need be.
Your mentor has been trading in the market, in most cases, a lot longer than you have and therefore has seen more market conditions and can best advise you as to how different fundamental announcements, economic situations, rate decisions, etc can affect the pairs your are trading.
Seek your mentors advice when opening a new trading account, developing a new strategy, deciding on trading a new pair, and any other changes that you plan to make regarding your trading. Getting the advice of someone more experienced may prevent costly mistakes.
Understanding the flow of the market comes with experience and your mentor is sure to have that. Make sure you pick someone that is profitable in this market, someone that has experienced both successes and failures, someone whom is thorough and honest and someone who genuinely cares to help make good traders great Forex traders.
A mentor is a valuable asset and should follow you along your trading career. Your mentor will be one of your biggest cheerleaders. A great mentor will inspire you and help you discover your trading style. Never attain a mentor that encourages you to mirror or copy their trading style. Trading is an individual unique skill, your creativity, point of view and own life experience is the secret ingredient that sets you apart from the next trader. Find a mentor that encourages you be your own trader.
Tip #12 Get Your Mindset in Check
Forex trading has a lot to do with psychology. At the end of every trade execution in one way or another there is a human with real emotions, their own knowledge principals, and their own unique experiences. All of these effect how you trade. Most traders under estimate how much psychology trading entails.
As a Forex trader you will learn that buying and selling currencies in the market has the same psychological characteristics as do buying and selling outside of the market. Understanding consumer behaviors is very beneficial as you can better relate to what emotions are triggered during certain fundamental announcements or as it relates to a countries economic stance.
Psychology as it relates to your own personality definitely is a factor when trading. How do you feel after you lose? Are you able to move on or do you revenge trade? How do you deal with the whipsaws of the market? Are you able to decipher a good setup or do you see the market as too confusing to even begin to sort through the noise? How confident are you overall in your trading abilities? Having a positive mindset can make or break your trading career. Stay in a positive place. Stay believing in yourself and your trading plan. Keep the negative emotions out of trading decisions. Having a solid trading strategy as discussed above will help with this.
Do not trade when you are having a bad day. Just like starting off the morning on the wrong foot usually leads to having a bad experience at work, or with your significant other, or with your family and friends, maybe even your commute work it will spill over to your trading as well.
Master trading psychology and you will see your trading improve drastically.