What a time to be a Forex trader! 2020 is a challenging year on many levels, but it’s pointless to argue that people who chose to study and make money from home are benefiting tremendously. So, why not test yourself and become a profitable trader? Here are some very helpful trading Forex tips to get you started.
Can absolutely anyone become a successful Forex trader? Yes. Is it going to be easy? Not exactly. Before you dive into the vast sea of currency trading opportunities, it is important to get a clear vision of the journey ahead. There is a lot to learn and practice. And there are going to be both victories and setbacks.
The good news, however, is that as long as you are determined to reach positive results no matter what, you are very likely to succeed. Plus, you will always have tips and suggestions from this article to assist you along the way.
So, repeat after me: “I am more than able to become a successful Forex trader, but I'll have to put in some effort.”. Done? Good! Let’s continue.
Choosing The Right Broker
There are a lot of brokers out there, some attention-worthy and others not so much. Your main task is to filter through the good, the bad and the ugly and land your choice on the best. Otherwise, none of the Forex trade tips will be effective.
Forex brokers are individuals or companies who will give you access to the market. The services may vary from broker to broker, but generally the more, the better. This means that you will need to find a broker who is going to provide learning materials, analytical reports, signal sources, technical tools and practice spaces and more, ideally for free.
Usually, a broker who has been in business for over a decade is going to match most of the criteria. The experience at the market means skills and insight in most areas of currency trading. As a trader you will majorly benefit from a team of market experts, whether it is to guide you through a new tool, or provide tips of Forex trading strategies and techniques.
Brokers are also the ones to give access to online trading platforms, such as Metatrader 4. As long as you have a trustworthy broker on your side, you should be getting the trading software updates, tips on using it and suggestions on the most effective add-ons at no charge.
Now that you have chosen a broker, let’s get one step closer to the actual currency trading process. Next, we are going to talk about finding a strategy that fits you.
Finding A Trading Strategy That Works For You
There are traders who carefully plan each move and those who depend on pure luck. Guess which ones succeed? Although Forex trading seems simple at first, there is so much to it. Because while the market is moved by traders, the real question is: what moves the traders?
And this is where the strategies come in. We all have different goals and starting points when it comes to currency trading. Some are comfortable investing thousands of dollars each week and trade aggressively, others choose to take it slow and grow their capital more gradually.
Additionally, there are hundreds of ways to make a trading-related decision. The frequency, the size, the time and the reason for your trades are all ultimately defined by a strategy. Most tips on Forex trading strategy selection will recommend trying several options before settling down.
The best explanation is that you might have one vision at the beginning, and an entirely different one as you go. Maybe you wanted to take it slow at first, but then noticed that you are stress-resistant enough for something more fast-paced, like scalping, for instance. Go with your gut and put comfort before ambitions, and you’ll definitely find a strategy that meets your needs.
Learning As Much As Possible
But the search doesn’t stop at finding the strategy. In fact, your currency trading journey is going to consist of a lot of research and learning throughout the way. Very logically, you’ll need to start with the basics. One of the fastest and simplest ways to do so is take a trading course offered by your broker.
In a course you will go through some professional lingo and concepts, knowing which is going to help down the road. You will also come across some general trading tips for Forex and perhaps even get an idea of what type of trader you want to become.
Later on, after you have already been trading for a while, make sure to always look out for new information. A great example of why this is important is the significant rise of Bitcoin back in 2018. Nobody could have predicted it even one year prior, which means that only the traders who stayed alert and kept educating themselves got a chance to profit.
Now, we have already mentioned trying out different trading strategies before making a choice. Same goes for pretty much anything else you learn about Forex trading. For instance, you found information that a specific currency pair is getting more and more attention and it is a good idea to invest in it now. This might be true, but it can also be false. The only way to check is to try it yourself.
Giving Your Skills A Go In Demo
Demo account is an insanely useful tool for both beginners and professionals. Demonstration mode simulates a live trading process, using the same tools and price quotes. However, this simulation won’t require any money, therefore it won’t have any effect on your actual account balance.
The funds you use in the Forex demo account are virtual, so your gains and losses will be too. But although you are not gaining any profit, trading in demo is absolutely necessary for practicing currency trading before you go on to the real market. The best trading Forex tips for demo accounts is to take your time and try everything that comes to mind.
Demo Forex accounts are free, provided you go with the right broker, and don’t dictate any time limits. So, simulate trades as much as you would like, until you are ready to move on.
It is time to move on to a slightly more advanced area of Forex trade tips, starting with the importance of mastering market analysis.
Mastering Forex Analysis
The Forex market analysis is a very big aspect of trading. In order to brief this short and informative, here are several points you need to know about analyzing the market first.
There are two general directions of Forex analysis: technical and fundamental. There is also a subcategory known as sentiment analysis. The main goal of each analysis type is to try to forecast the upcoming moves of the price in order to make the best decision.
Technical analysis looks at the price of an asset, comparing values over different periods of time. For example, you might review the movement of your chosen currency pair over the course of one month.
Fundamental analysis explores the factors that affect the market from the outside, such as economy, politics, corporate announcements and so on. Fundamental analysis is considered rather challenging, simply because there is so much to consider. For the same reason it is also believed to be highly subjective.
Sentiment analysis is the measurement of traders’ moods and intentions. Sentiment analysis can be used as a part of both technical and fundamental approaches. The main theory behind it is that by judging how most participants feel about a certain asset we can predict what they will do next, and how this will affect the price.
The most successful traders are the ones who mastered coming each analysis type for a unified trading strategy. Although it is also important to note that it can be tricky in the beginning. Novice traders are generally advised to stick with technical analysis.
There are numerous supportive tools that assist in analysing the market. While looking for a tool like this, keep in mind that a source has to be trustworthy and safe. When in doubt, check with your broker for options that you have in your situation.
For more detailed tips of Forex trading analysis check out our constantly updating signal sources or in-detail posts about each analysis type.
Chart reading is technically a part of the market analysis, but it still makes sense to say a few words about it. The price chart is any trader’s number one tool and info source. There you will find a detailed report of the currency pair’s adventures over the specified time period.
The most common chart types are: line, bar and candlesticks. A line chart simply connects the closing prices over the chosen period. Traders can also adjust this chart to connect opening, median, highest and lowest prices. The bars and candlesticks are slightly more elaborate. Each bar and each candle consists of elements that represent the opening price, the closing price, the lowest and the highest prices over the selected period of time.
Understanding how charts form is important for a number of reasons. Mostly, because watching the price fluctuate can give you an idea in which direction it might go next. To predict the price movement traders use various techniques, instruments and strategies. And sometimes the forecast can be made based on just an observation.
For example, specific bar and candle formations, known as patterns, can predict the reversal of ongoing trends. And knowing how long a trend will last is crucial for fruitful trading. That’s why the next brief segment of this trading tips Forex list is dedicated to trend following.
If you are new to Forex trading, the trend is your friend. For the most part. Although there are many traders who chose to act against the big wave, trend following is still the most popular approach. The explanation behind this is simple: trends occur and end for a reason, therefore noticing them, going along and getting out at the right moment is the most logical solution.
Once again, there are a lot of ways to identify, confirm and forecast trends. The most commonly used way is technical indicators. These are Metatrader 4 add-ons that are designed to extract, calculate and project specific pieces of data. For instance, a Bollinger Bands indicator that consists of three lines crossing the chart is often used by traders as a support and resistance tool. When it’s applied to the chart, in most cases it would be safe to say that the price will very likely bounce down from resistance (the upper band) and bounce up from support (the bottom bend).
This is just one of the examples how trends can be conquered, analyzed and used. Metatrader 4 offers over 50 built-in indicators, each with a very specific purpose. Make sure to get to know this aspect of currency trading in more detail and very soon you won’t be able to imagine trading without indicators. Next on our tips Forex trading list, is something that doesn’t really come to mind of every trader.
Controlling Your Emotions
People are largely driven by emotions like greed, fear, ambition and so on. Since traders are for the most part human, it makes perfect sense that a lot of trading decisions are based on feelings. And although this can be an asset in some cases, more often than not using your emotions to trade will harm the outcome.
We’ve talked about strategies and analysis first for a reason. Logic and knowledge should always come first in any type of situation. The Forex market can get hectic at times, and there are going to be moments when you would want to continue riding the trend, even after you achieved your initial goal. Or the process will get too aggressive and your first instinct would be to pull away, without getting to any kind of result first.
Breath in, breath out and keep using your head over your heart. None of the tips of Forex trading listed here will work unless you are completely calm and focused. The best way to do this is to take a philosophical approach and treat each rise and fall as a learning opportunity.
Keep reflecting on every move, even if it was unsuccessful and take this knowledge further along with you. You’ll see that this will help you think faster and waste less emotional energy on the trading process.
Managing Your Risks
Last but not least, the biggest difference between an expert trader and a newbie is that a pro always acknowledges, evaluates and minimizes the risks. Risk is inevitable in currency trading, so the smartest thing to do is to face it.
There are multiple dozens of risk managing techniques out there. The most common and probably the simplest one of all is to set limit orders. For example, a stop loss order will draw a line at the point where your losses will start to become too large and end the trade automatically. Similarly, a take profit order will close your position once it delivers expected results, to make sure you don’t head down to an unexpected turn.
Learn more about risk management and always keep in mind that every significant gain will be associated with significant risk. Your job is not to avoid it entirely, because that would mean not trading at all, but to handle it in the smartest way possible.
At this point we’ve got through ten most important Forex trade tips, which means this is the time for special bonus tips that will help take your trading on the entirely new level.
Bonus Forex Trade Tips
We’ve discussed the crucial aspects of Forex trading. You now know that your currency trading journey is not likely to be simple. But if you are dedicated to becoming a pro, there is virtually nothing to stop you.
Here are a few handy bonus tips Forex trading that you can add to your professional trading knowledge collection.
Choosing the best Forex trading conditions. Did you know that you might have completely different outcomes by implementing the same strategy during different times of the day? Forex market is global, which means that traders across the world attend it at different times. And if the currency pair you chose is specific to a region, it would make a lot of sense to synchronize your schedule with that region’s time zone. Because the more traders will participate in the process, the faster the price will move forward and the more opportunities are going to occur.
Planning every trade. There is strategizing, and then there is move planning. Some strategies will give you a lot of info on how to find the perfect trading opportunity and when to enter, but will not exaggerate on when you need to stop. Your trading plan needs to cover these points: why you are making this move, what is it going to be like, when do you enter and exit, what are the risks and what are you doing to prevent losses. Additionally, you should be able to picture all possible outcomes and mentally prepare for each one of them.
Knowing when to walk away. There are no rules when it comes to drawing your own limits. Because every trading journey is individual. But you absolutely have to establish when enough is enough in your case specifically. Maybe you have been trading unsuccessfully for a whole day or a week. Or maybe your losses are overshadowing your gains. Don’t push it — take a break. Just make sure to always come back, since the successful traders are the ones who choose not to give up.
Avoiding over-trading. Trading too much is not always good. If you are a scalper, opening too many trades can eat into your account balance through spread charges, and if you are a long term trader, it can be challenging to monitor many positions at once. Prioritize the trades you are planning to take and don’t rush to get everything at once. Remember what they say about slow and steady?
Thinking creatively. Final one of today’s trading Forex tips is feel free to think out of the box. Can’t seem to find a strategy that works for you? Invent your own! This way you can tailor the trading process to your personal requirements and have a more detailed, thought-through action plan. Keep in mind that you can always use the demo account to work out the ins and outs of your very own strategy first and only then take it to the live market.
Trading Forex Tips Summary
You will come across many other helpful tips of Forex trading along your journey. Just always make sure to double check the sources and not follow every suggestion blindly. Having doubts? Consult with your broker’s team or give the tip a go in the demo mode.
The most profitable currency traders are the ones who continue exploring every step of the way, while taking a set of risk preventive measures to ensure things don’t go south.