7 Tips and Tricks For Trading Forex
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- June 4th, 2013
- in Forex Tips
7 Tips and Tricks For Trading Forex
7 forex bloggers have gotten together to put some of their best tips in one article, on trading forex. We will be working together on a series of articles that we believe will provide helpful and interesting information for any reader that is interested in trading forex. Please leave comments below so we can adjust the series based on some of the feedback we receive here.
Ideas on trading forex
The first article is a compilation of forex tips that have been added from the experience of these writers. Each author has contributed with an important tip that they believe will help you in your trading. So without further ado, here goes;
Yohay – Forex Crunch
Don’t risk too much of your account all at once. The acute mistake that beginners make is that they use a very high leverage and burn out their account before they learn to be profitable. In some cases, forex brokers try to teach their clients about money management, but not everybody listens.
So, the new trader listens and makes careful moves, but after a few successful trades, he becomes greedy for more profit, and enlarges his positions, totally neglecting the caution required. So, money management isn’t only for your first steps, it’s critical with all positions.
Simit Patel – Informed Trades
For those just starting out with trading forex
, I would recommend the following:
• Understanding your own personal psychology is extremely important. Are you comfortable with active trading? Or are you more comfortable with investing/trading infrequently?
• Know yourself first, and then you can begin to craft an approach that caters to you.
• Risk management is more important than finding the right strategy.
• I would recommend understanding both fundamental and technical analysis. If you are a short-term trader, technical analysis is more important, whereas fundamental analysis is useful for shaping a long-term view. Most of the information available about fundamental analysis is useless, in my opinion. In terms of fundamentals, I recommend understanding the following: how money is created; the historical role of gold in an international monetary system; the role of the world reserve currency; the role of the IMF, World Bank, G20, and their stated goals.
Lastly, remember that most traders lose. This means you should proceed with caution, and that you should be comfortable with being a contrarian. If the crowd is losing, you want to be the on the other side of the trade.
Casey Stubbs – Winners Edge Trading
There are so many areas that are important to be successful in trading so it is hard to say that one is more important than another. In order to be successful you must combine a many things together. That is why my tip is to have a solid trading plan.
My tip here is to be balanced in your trading and don’t leave anything out so you have no weak spots. Have a solid plan for risk management, a solid strategy and trade management all planned out within each traders plan. Make sure you review it often and find out what areas you are executing well and what areas you need help in.
Mike – FxMadness
Most beginners could be overwhelmed with choices offered by the Forex brokers these days. On the most popular trading platforms, 40 or more currency pairs are the norm, with some providing as many as 100. Which ones to focus on and trade?
Aspiring traders should probably focus on the so-called “majors”, meaning US Dollar pairings with the other major currencies. These are EUR-USD, USD-CHF, USD-JPY, GBP-USD and AUD-USD. They offer the best liquidity, the tightest possible spreads and are most active. All analysts follow and comment on them, so there is more than enough easily available information about these pairs.
When starting trading, it might be even better to follow just one of the majors. This way one can learn faster the specific characteristics of the chosen pair. The best prospects are the EUR-USD, USD-CHF and GBP-USD. On top of the attributes mentioned above, they are also regarded as the best “charting” currency pairs. This means that their charts are very well suited for all aspects of technical analysis, possibly offering the easiest learning curve.
The Geek Knows
Trading as a machine.
Often in times of pressure, we succumb to our greed or even fear and make a wrong decision.
Closing a position prematurely in fear of an unexpected sentiment change without concrete justification or letting a winning position turn into a losing one due to the desire to just let it run a little while longer, these are examples of what happens when we let our emotions interfere with out trading strategies. This is where forex robots beat us when it comes to trading. Having said so, the forex robots lack something that we humans clearly have. That is the ability to adapt to differing market situations.
Hence it is critical that we devise a trading plan, set the appropriate risk and reward conditions and seek to execute it without the inference of excessive emotions. Together with our humans’ ability to adapt appropriately, this combination is a possible winner.
Liviu – InnerFX
Do your best to avoid being biased by having a favorite currency like you are having a favorite sports team.
The market moves in cycles, up and down, depending on many events and reasons. A currency pair is not a game between your favorite team and a rival –
so be prepared to buy or sell any of them when you see a trend change.
Money management seems to the hot topic these days and I definitely think that this is one of the key aspects to successful trading. A solid money management approach is key to long term profitability, and yet something which very often is undervalued as this obviously is less interesting that pretty much anything else related to trading. So a lot of traders underestimate the importance, but at the other extreme, we have traders who, in my opinion give MM too much importance. Authors have written entire books on this subject and when traders lose money, “guru´s” blame it on lack of MM. Basically; Money management is important but fairly simple! Find something which suits your strategy and stick to it. Don’t make this more magical than it actually is. Keep leverage low, and don’t overtrade – Sure there is more to it than that, but this will give you a head start, and then when you got a great strategy in place