Forex Trading Tips

In the foreign currency trading markets, there are all sorts of successful and profitable traders, who are knowledgeable about forex trading tips, along with a large number of unsuccessful traders with a dwindling amount of trading capital.

Forex Trading Tips

What separates the successful trader from the unsuccessful trader is usually a significant amount of foreign currency trading experience, a deep understanding of the currency markets and a sound understanding of the causes of currency fluctuations, along with a trading plan and good money management habits. Foreign currency traders, whether a short-term day trader, a swing trader, a momentum trader, or a long-term trader, need to have a good, well-thought out entry and exit plan indicating the price points of where they will take profits and the stop limit points where they will take small losses in order to preserve capital and to live to trade another day.

A sound working knowledge of market technical indicators, such as support and resistance levels and pivot points are real necessities for short-term or medium trader. One of the best forex trading tips is that, along with a good trading plan, a successful trader needs to have sound fundamental knowledge of macro-economic events, political events, market psychology and an understanding of inflation, interest rates, gross domestic product and the business and economic outlook of the countries in whose currency he trades.

A successful trader should choose a currency pair that he is comfortable holding and trading. Some pairs, such as the British pound and the U.S. dollar, GBP/USD are often volatile and fluctuate rapidly during the day. Other currencies are slow moving and fluctuate only minutely in day- to-day trading. These macro-economic events, along with a country’s economic performance and outlook and its monetary and fiscal policy are drivers of currency fluctuations. Money management skills, how much capital is going to be risked on a trade and choosing the right strategy out of several Forex trading strategies are important considerations for a foreign currency trader.

Leverage, often 500:1, can bring large profits to a trader’s account, but can also wipe a trader out on a bad trade. As a rule of thumb, no more than two or three percent of a trader’s capital should be at risk on any one trade. Looking for more forex trading tips? When trading in the foreign currency market, a successful trader should on the look-out for trends, or changing trends. To make money in the market, it is better to catch a trend and be a profitable part of it rather than fight a trend, deny it or go against it.

To catch these trends, a successful trader should be able to understand price and volume and momentum. By looking at technical indicators and uncovering diverging points, a trader could get in early on big profitable move. Price follows momentum and volume and by checking price charge and one of the oscillators, like the relative strength index, a trader should be able to determine a real trend as it is about to begin.

The foreign exchange market is a complicated market with a lot of sophisticated traders using very sophisticated tools, and a trader should continuously educate himself and follow sound forex trading tips to become successful. Following a strict set of rules and tips each trader sets for him or herself is the way to succeed in online forex trading.

Here are some tips to help you trade better, limit your losses and  earn more money:

Trade with an amount of money that is suitable for you

You should trade with money you don’t afraid to lose and can sleep at night. I know it sounds strange but trading will be difficult at first but as you gain more experience and confidence you’ll be able to trade with higher amounts and a bigger bankroll. Don’t quit your day job just yet and see your first steps in trading as learning curves.

Always come prepared to a trading day

Always do your homework prior to any trading day. What does that mean? You need 2-3 hours each and every day to get yourself started, so that means reading charts, looking for news, looking for stocks and knowing exactly which stocks and currencies to buy, at what prices and when to sell them. This way you know how much you’ll profit and limit your losses if the trade was wrong so there is no room for chance here, it’s all calculated and planned ahead.

Work with your mind and not with your gut

Let me tell you something and remember this – Trading is all about human psychology! When people are happy and feel confident they buy, when they are afraid and feel unease they sell in order not to lose, trading is all about charts and human psychology of the traders, so if you know how the other side thinks, you’ll take his money into your own pocket.

That is why it is important to be cool, calm, do homework, be prepared and work with your mind. Trading has nothing to do with luck and we are not gambling here but making money, so if you work with your mind, set automatic entry and exit points that you’ve worked on prior to trading day and not do any actions according to gut feeling or emotions, in the long run you’ll make a lot of money. Remember this!

If you can’t handle the swings at first set your orders and close the computer

You’ll have everything planned and written down. Which stocks and currencies to buy, at what prices and when to sell them, that is all good and how it should be but once you enter a trade your gut starts to work and your mind stops (something the professionals learned to control) and that is why once you see your stock goes down you may sell it, only to find out it went much higher later in the day.

Stocks will go up and down all trading day, if you can’t handle this and in order not to make the mistakes I’ve talked about earlier, set automatic orders when to buy and when to sell, let the program do it for you, close the computer and go have fun. At the end of the day you’ll check to see if you earned money or lost a little, because it’s all set ahead. Homework and self-discipline, remember?

Know to take small profit too and always limit your losses

One thing I love to hear about people who lose money on a trade and don’t sell it is them trying to convince themselves it will go up and they’ll sell it then, why sell now when you’re down? There are no guarantees for the stock to go up and no one knows what tomorrow will bring and that is why you should always exit a position that was not successful and you lost too much money there than you can handle. That is why it is also important to learn that something grid is bad and it’s better to take small profit than risk to lose the profit and the trade itself but that will come to you just like any other thing with experience and trades.

Never stop learning and reading charts

One important thing to remember about trading is that the more you learn and the more you trade the better you become. Again, it will take you some time to master trading, it is not a “get rich fast” plan and unless you win the lottery there is no such plan but the money is there always and it’s a lot of money. So, learn from mistakes, read blogs and forums, learn from other traders, read trading books, and always but always read charts, as many as you can even if you’re not trading at the moment. There will come a point that you’ll be able to look at a chart and in 2 minutes read it entirely, this will give you a lot of stocks and currencies to choose from in less time and that means more money making each and every day.

These are just a few important tips you should write down, memorize and follow. All professional traders in the world follow these rules each and every trading day and that is why they are so successful, rich and can do whatever they want with their time. They are not greedy, they work with their minds, they trade with the amount of money that suits them as traders, they always learn and they have self-discipline.

I wish you all the best but not luck because luck has nothing to do in the trading world and that’s the best thing about trading, you can anticipate and predict it and if you were wrong, you lost only a little because it’s all about how you plan and execute your trades.

More tips to come soon, so stay tuned…

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Categories: Forex