Top 10 Trading Tips for Forex Tradings

May 19, 2016

Top 10 Trading Tips for Forex Tradings

Professional Forex traders employ various methods which, developed based on past experiences, have shown to be profitable. Each and every one of these methods encompasses some type of a predetermined signal, which when received, prompts the trader to either enter or exit the currency market.

These Forex trading signals may be based on one, or a combination, of the following; technical analysis, charting assumptions, and verifiable public information or governmental reports.

Verifiable public information is usually the first signal that is received by a trader. Upon receiving it, they must move immediately to confirm their assumptions regarding the movement of the market by focusing on their technical analysis. An example of verifiable public information was when the United States Treasury Department stepped into the financial crisis by propping up or purchasing numerous lending institutions that were on the verge of collapse.

Once the trader receives that information they then have two options. The first is to enter the market without delay under the supposition that the US dollar will strengthen. The second option is to verify their trading theory through the use of technical analysis and charting assumptions.

Verifying the trading theory is a two-step process, the first of which involves acquiring verifiable public information, the same data received by the professionals. You can obtain this information for free from many of the top news gatherers such as Reuters, Bloomberg, CNN or BBC by subscribing for an RSS feed so that you can have the news to your desk top computer instantaneously.

This can be done by signing up for the service on any of their websites. Once you do that, you will be in the ball game with the big boys as far as how they receive their information

The next step you need to take so that you can verify a trading theory on your own is to get yourself a software system that will provide you with the technical analysis and charting assumptions. Today there are numerous top tier software products available that equal those used by the giant banks and financial institutions.

The use of Forex trading signals to predict the movement of the currency market is a time tested and proven method of profitable trading. It has never been easier for an individual investor to be on equal footing with the professionals as it is today with so much exceptional software, based on Forex trading systems, available.

The Top 10 Tactics of Forex Trading

Below are some well-known trading tips for Foreign Exchange traders.

1. An old cliché but one which holds great truth – ALWAYS trade in the direction of the trend. In the Forex markets we see great trends in currency pairs that last for a long time (cycles). Therefore, it pays to identify the dominant trend of currency pairs. Going against the trend will only cost you a lot of money and destabilise you emotionally.

2. Plan your trade, trade your plan. Trade plans can be made well in advance in the Forex market and help eliminate emotional trading. The more mechanical you become in entering and exiting trades, the more profitable and consistent you will become in the long run.

3. Before initiating any trade, always know your risk and truly accept this risk. The risk is defined as the number of pips from your entry to your stop loss.

4. Always, use a stop loss after initiating a trade. Placing a stop loss does not essentially mean that you are expecting to experience a losing trade but will help minimize losses against unforeseen market circumstances caused by unforeseen events such as geopolitical events etc.

5. After initiating a trade, a trader must have clear trade management guidelines for that trade. Trade management means that the trader knows in advance when and where he or she will move the stop loss and when to scale out of part of the trade and eventually where to take profits.

6. Whilst trading Forex, it is imperative for a trader to know the characteristics of the currency pairs he or she likes to trade. A way of achieving this is by looking at the past behaviour of the currency pairs in order to ascertain key characteristics such as: a) how well does the pair trend? b) which economic events influence the pair? c) what is the Average Daily Range of the pair? etc.

7. Always keep in mind that the Forex market presents the trader with a constant stream of opportunities, therefore, if the trader experiences more than 2-3 consecutive losses, stopping to trade for a period of time is advisable. This will give the trader time to refocus and examine mistakes and prepare psychologically to re-enter the market again.

8. Trade to profit and not just to trade. Many traders think that because they might sit in front of a trade station for a period of time it is logical that they should be trading constantly. A trader should only initiate trades once all the odds are stacked in his favour and he has an edge. Then and only then should trading be initiated. Patience and discipline is an integral part of successful and consistent trading and are traits that a trader must endeavour to possess.

9. All successful traders have a trading diary that contains all the trades good or bad they have ever initiated. This gives traders the opportunity to constantly evaluate their performance and rectify any identified mistakes.

10. All successful traders are constantly learning and evolving. Just when you think you know it all about trading, a new curveball gets thrown your way. Furthermore, as time passes by, new methods of making money are developed and need to be learned about.

Please note: The above mentioned tips do not represent any form of investment advice or investment recommendation.

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Hercules