In recent years, the forex market has gained a lot of popularity, and now, you’ve made your decision to join it and are probably looking for forex trading tips. After all, it’s a market full of profitable opportunities. Or is it? Succeeding in the foreign exchange (FX) market is easier said than done. You’re confused by all the different sources and what they say you should or should not do; You read books, watch videos, and listen to trading podcasts for hours on end, just to leave you more lost than when you began. All you want to know is, “How can I succeed in the forex market?”
If you’re at this frustrating stage, wondering how long it takes to get to the good part when you can actually earn money, then this article is for you. We’ll be going over 10 of the most important forex tips, tricks, and secrets, from creating your trading plan to choosing the right broker. If this sounds interesting to you, keep on reading!
1- Start Learning and Get Comfortable
The first thing you’ll need to know about the forex market is that it’s absolutely HUGE! In fact, the daily trading volume of this market surpasses $6.6 trillion. That’s eleven 0s! With the sheer size of this market, it’s no surprise that the information and data are constantly being updated and upgraded, creating new learning opportunities.
So, the first trading tip to succeed in the forex market is to get comfortable with studying. Aside from the initial time you need to invest to learn the basics of trading and kick off your trading journey, you’ll need to regularly update yourself on market trends and strategies and find out how to use them to your benefit.
1-1 Learn the Basics
Before you can partake in any form of trading, you’ll need to familiarize yourself with the basics of the forex market. Start with fundamental concepts such as currency pairs, bid and ask prices, spreads, etc., Then, work your way up to more complex subjects such as technical analysis, indicators, and price action patterns. Taking a classified, coherent forex trading course will help you better understand the market dynamics and how you can use them in your favor.
1-2 Familiarize Yourself with Leverage
One of the most important subjects you need to learn as a trader is leverage and how you can trade with it. To put it simply, leverage is the capital you borrow from your broker to increase your market exposure (the amount of money you invest). By doing so, you can increase your potential gains. However, leverage can also multiply your losses, which is why it’s often referred to as a “double-edged sword.”
Learning to use leverage the right way is crucial for beginner traders, as it will not only give you a chance to gain more but also protect your capital from excessive loss. So, make sure to cover the subject in your early forex education program.
2- Find Your Ideal Trading Strategy
Once you’re more familiar with the dynamics of the forex market and how you can trade in it, it’s time to find your trading strategy. You should allocate enough time to learn about different forex trading strategies, their advantages and limitations, and how one can implement them. Then, find which strategy matches your personality and preferences better.
For instance, if you feel uncomfortable sleeping while you have open positions, then you might want to try day trading (scalping). Or, if you’re a busy person and don’t want your head constantly stuck in different charts and analysis reports, you should probably go for a long-term trend trading strategy, such as position trading. So, our next forex trading tip would be to learn what’s best for you by heart before starting to trade.
3- Develop a Trading Plan
The third most important forex trading tip is to develop a strong trading plan. Set clear, realistic, and achievable goals for yourself, determine your risk tolerance and factor in potential losses. You should know how you will analyze the market, whether it’s through technical analysis, fundamental analysis, or a combination of both.
See how your analysis style helps you determine entry and exit points, and write down an approach to do so. Stay true to your trading plan and trade with discipline. Remember that having a couple of successful or failing trades doesn’t mean you should leave your trading plan behind, so don’t let your fear or greed control you. Stick with your plan and keep yourself educated. If you feel like some parts of your plan are not effective, adjust them before getting back to trading with discipline.
3-1 Determine Your Market
One important step in developing your trading plan is to find the market in which you’re going to invest. Determine which currency pair(s) you’d like to invest in, whether major, minor, or exotic, and find its positive or negative correlations. For example, the U.S. dollar against Canadian Dollar pair (USD/CAD) tends to move in the same direction as the U.S dollar against Swiss Franc (USD/CHF) or U.S dollar against Japanese Yen (USD/JPY) pairs, having a positive correlation with them. On the other hand, this currency pair usually moves in the opposite direction of pairs such as Euro against U.S. dollar (EUR/USD) or Sterling Pound against U.S. dollar (GBP/USD), thus negatively correlating with them.
4- Find a Good Broker
Next on our list of forex trading tips and secrets is to find a good, trustworthy brokerage. You’ve covered the basics, and now it’s time to get to trading. But finding a good broker stands in your way, not being as easy as you thought. You should comprehensively research different brokerages and assess them individually and in comparison to one another to be able to make a good decision.
It’s recommended to choose a broker with lower spreads and commissions to reduce your trading costs. On top of that, look for diversity in their trading assets and account types, and make sure they offer premium trading platforms and leverage trading. It’s also a good thing if your broker of choice provides a well-crafted IB so you can keep a passive income from it.
All that said, you should definitely put ITBFX on your broker assessment list. Our spreads are super tight, starting from 0.0 pips, and we only charge a small commission on our ECN accounts. Speaking of accounts, you can take advantage of our three account types, nano, standard, and ECN, available on MetaTrader 5 (MT5) and our exclusive trading platform, ITB Trader. You only need $1 to open an account with us, and you can enjoy a wide variety of trading instruments, including forex pairs, cryptocurrency, metals, indices, and stocks. Using our not-too-high and not-too-low leverages, you can magnify your potential gains, and through our IB program, you can invite your friends to trade with us, passively benefiting from their trades. To open an account with us, all you need to do is click here!
5- Open a Demo Account and Practice Trading
After you find yourself a broker that you like, it’s time to start trading. If you’re a beginner forex trader, which we assume you are, for the sake of the article, you should start out with a demo account. Doing so will give you countless opportunities to test your trading plan and strategy, familiarize yourself with the market and its dynamics, and find out what works for you and what doesn’t.
A demo account will give you virtual, non-real funds, so it doesn’t matter how many times you mess up. You can just relax and test the waters to find your strengths, as well as those areas that need more work. Keep in mind that this is one of our most important forex trading tips and secrets that you should under no circumstances overlook or skip, as it acts like the training wheels that guide your forex trading bike with little to no accidents.
6-Keep Track of Your Trading History
One of the most important forex trading tips and secrets you need to know is having a clear record of your trading history. This will tremendously help you in the future when you want to analyze your trading plan and strategy to find if anything needs changing or if you should put more focus on certain aspects.
6-1 Keep a Trading Journal
The first thing you’re gonna do is keep a trading journal where you enter every trade you have initiated, your entry and exit points, your analysis method, and how everything ended up working. Doing so will help you get into a constant self-improvement cycle, where you analyze what made your forex trading successful or what made it fail. Using this journal will provide you with the opportunity to improve your trading plan gradually, learning little tips and tricks as you go about your investments.
6-2 Analyze Your Performance
Using your trading journal, you’re gonna analyze your performance. You can do this via a few different methods. First, you can use your journal to calculate your expectancy, which shows how much you can count on your trading plan and overall system to work. To calculate your expectancy, you should take a look at your last 10 trades. If you haven’t opened any positions yet, assess charts from previous days and find entry and exit points there according to your trading plan. You can then determine if your hypothetical trades would’ve ended with profits or losses.
6-3 Find Your Averages
Having the stats of your previous 10 trades ready, you should find your average win and loss. To do so, first, see how many of these 10 trades were winning and how many were losing. For example, consider that 7 of your 10 trades were successful. After giving yourself a pat on the back for your seemingly efficient trading plan, see how much you gained through these 7 successful trades. Let’s say you earned a total of $2100. Now, do the same thing for your losses. Let’s consider your losing trades cost you a total of $600.
Now, all you gotta do is divide your sum of wins or losses by the respective number of successful or failing trades. For your average win, you should divide $2100 by 7, which is $300. As for your average loss, divide $600 by 3, coming to $200.
6-4 Determine Your Expectancy
Next, you should use your average win and loss to calculate your expectancy. To do so, you should follow the formula below:
EXPECTANCY = ( AVERAGE WIN * %WON ) – ( AVERAGE LOSS * %LOST )
Following this formula, your calculations should be like:
( $300 * 70% ) – ( $200 * 30% ) = $150
What this tells you is that regardless of your losses, you’ve gained an average of $150 per trade. You can use your trading expectancy to get an idea of approximately what you can expect for your future trades. However, keep in mind that this number doesn’t guarantee how your future trades will play out.
6-5 Calculate Your Risk-Reward Ratio
You can also use your trading history to determine your risk-reward ratio, showing how much risk you’re comfortable taking. Following the previous example, if your average win is $300 and your average loss is $200 per trade, you should calculate this ratio as established below:
You should then get the ratio of these two metrics or your risk-reward ratio. If we use the numbers from the previous example, your risk-reward ratio would be 6:21 or 1:3.5, meaning you stand to gain $3.5 for every dollar you risk.
6-6 Find Ways to Stay Rational
One of the most important forex trading tips and secrets you should never forget is to stay away from emotional decision-making, fear, and greed. This, of course, is easier said than done. One of the things that can help you with this process is keeping printed charts and entering your trade analysis there. Include your entry and exit points, how the trade went, and what caused you to succeed/fail. Were you influenced by fear or greed? Or did you follow your trading plan without letting other things cloud your judgment? Doing this will help you recognize your emotional patterns and develop ways to keep them separate from your trading decisions.
7- Stay Consistent
We have already covered this subject, but staying consistent with your trading plan is key to success in forex trading. This includes avoiding emotional decision-making or following every other strategy you’ve seen people work with. Stick to your plan and your plan only, and don’t let other emotional factors impact your decisions. If your plan fails continuously despite you abiding by it, then it’s time to make changes and adjust it to get a new trading plan, which you should also stick to.
8-Learn Risk Management by Heart
Risk management is perhaps the most important of all the forex trading tips and secrets you find in this article. You should define a clear risk tolerance for yourself. Traders are usually encouraged to take between 1% and 5 % risk.
Protect your capital with risk management techniques, such as stop-loss and take-profit levels. Using these levels limits your potential losses and lets you gain profits in sections. It’s also a good idea to diversify your portfolio. Invest in different assets, so if one of your trades goes against your favor, you don’t lose all your money.
9-Take Your Weekly Analysis Seriously
If you’re familiar with forex trading hours, you know that the forex market is closed on the weekend. Use this time to analyze your trading history and your possible next moves. Study your trading journal and printed charts to find what you should focus on and what needs changing.
You can also analyze the fundamental and technical factors that you believe are going to impact the charts in the upcoming week. Use tools such as economic calendars from Forex Factory or ITB Trader, as well as technical analysis tools. Try to have an idea of how the market will move in the week to come, as it gives you the upper hand in your trades, hence making weekly analysis one of the most crucial forex trading tips and secrets to know.
10-Open a Live Account
Finally, it’s time for you to open a live account and start trading with your real money. As exciting as this sounds, you should keep in mind that the stakes are much higher in a live account, so continue using these tips and keep studying to find even more precise tricks and forex trading secrets to keep you successful in such a volatile market.
Final Thoughts
If you’ve recently decided to join the forex market, you should know that it’s definitely not a land of dreams. This market can eat you whole if you don’t take the necessary measures and familiarize yourself with its basics and more advanced subjects. The FX market requires an open mind and the will to constantly learn.
To think of it, trading forex is like keeping a strict diet. Although sometimes you get to a level where no matter how little you eat, results are not going to come, or sometimes you only want the short-lived joy of eating an ice cream, you should keep sticking to the plan, just like FX trading.
In this blog post from ITBFX, we went over 10 of the most important forex trading tips and secrets that not only help you develop a trading plan but also make sure you stick to it. If you think there are other tips people should know about, share them in the comment section with us. You can also head over to our social media to stay up-to-date with market news and trends and find lots of educational materials.
The most important principles for successful forex trading are continuous learning, having a trading plan and sticking to it, and knowing risk management by heart.
There are many tips and secrets for beginner forex traders. The most important one is to keep abiding by their trading plan, continue learning, and start with a demo account.
Some of the most important risk management tips you should implement in your trading are having a defined risk tolerance level, diversifying your portfolio, and using stop-loss and take-profit levels.
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