There are literally thousands of forex trading tips to be found on the internet and an endless number of sources that promise they will help you become a better forex trader. The only issue is that it can get overwhelming and even confusing with so many tips and guides.
To help combat this issue, we have compiled a list of the 10 most important tips for forex traders. The first five tips are for beginners and people that has just gotten started trading, and the last five are more advanced tips for people with some experience.
All of the following tips are tried and tested, and they have been proven to increase traders ability to trade successfully on the foreign exchange market.
5 Basic Tips To Help You Get Started
Below are the five tips that we think every beginner needs to master if they want a chance to improve their trading skills. This is basic stuff, and most of the aspects can be adapted to any market and derivative.
1. Educate Yourself and Learn Some Basic Skills
Before you do anything else and even start considering opening your first position on the forex market, you need to educate yourself. Start by reading forex trading guides, check out a few tutorials online, and pick up some of the most popular books on forex trading.
First, after you have a good basic understanding of what forex trading is and how it works, we suggest you continue with the next steps in this list.
With that said, a basic understanding of the forex market will only get you so far. It’s even more important that you study and practice how one actually trades and succeeds in the forex market. That includes learning fundamental analysis as well as how to properly read candlestick charts and identify indicators.
All of this is absolutely crucial for anyone that wants to trade forex seriously, even if it’s on a recreational level. However, this is also something that will continue throughout your trading career, and you will never stop learn and developing as a trader.
2. Find a Regulated Broker
As soon as you start to feel comfortable about forex trading and you think you have what it takes to get started, you will have to find a forex broker to use. In some ways, this is the most important step because this is what will set you off on either the right or the wrong path.
You see, many of the brokers that are available are not very trustworthy. It’s a problem that large parts of the trading community are affected by. But as long as you know how to avoid these brokers, you shouldn’t have an issue.
One of the easiest ways to make sure you only use safe and regulated brokers is to stick with the brokers that we have recommended.
The team that runs BullMarketz.com has years of experience from the forex industry, and we have spent countless hours testing and reviewing forex brokers from all over the world. In turn, we have listed all the top forex brokers in the world base on a range of criteria. For example:
Personally, we use or have at some point have used all of the brokers that we’ve listed and we would never advise you to use a service that wasn’t safe. This means that each broker is regulated and trusted by millions of customers and that they have gone through our very strict reviewing process.
3. Practice with a Demo Account
We understand that it can be tempting to rush head first into the forex market and deposit thousands of dollars and start trading, but it’s not advisable. In order to activate a forex account with any of our brokers, you usually have to make a deposit so you can go ahead and do that. And we are big advocates of getting experience and practice using real money, so don’t be scared to start trading for smaller amounts right off the bat.
However, before you start placing the really big orders and start trading on a more professional level, you should practice using a demo account. This is one of the best tips for forex trading.
A demo account is a special account offered by all forex brokers that has been designed to help you practice and optimize your skills. The account is a replica of a regular trading account, but instead of using real money, you trade with virtual funds.
Naturally, this means that there is no risk of you losing any money and that you have the opportunity to practice forex trading in a risk-free environment. The benefits of using a demo account are endless, and it’s a unique tool that we highly recommend to everyone. In fact, a demo account can be used by professionals as well.
Just be aware that you shouldn’t get too comfortable using a demo account because it can increase the risk you experience later. The reason for this is that people tend to take bigger risks when they trading using virtual funds which eventually leads to them being reckless. And the last thing you want to be when you start trading on a real platform is reckless.
4. Pick No More than Three Currency Pairs
Avoid this common beginners mistake.
Many beginner forex traders get excited by the sheer volume of forex pairs that one can trade, and in most cases, people start trading on too many currency pairs at once, which is not good.
Professional forex traders tend to only focus on a selected group of pairs in order to become as efficient in trading them as possible. As soon as you spread yourself too thin and try to analyze several currencies at once, you will become overwhelmed.
Even professional stock traders often focus on one industry or a group of stocks at once.
Therefore, we suggest that you pick one currency pair to begin with and that you try to master that currency pair as much as possible. You can then move on and add one or two more pairs to the mix, but not more than that.
You should not start adding to your list of instruments until you have become good enough to monitor several currency pairs. However, as a beginner, three pairs is more than enough.
We also suggest that you pick one of the major currency pairs that are popular to trade with and that many others focus on since they tend to be easier to understand. Don’t start trading with exotic currency pairs unless you have a very good reason to do so.
5. Money Management
The single most important tip for every forex broker is to learn how to manage your money. This is also the single best way to minify your risks and losses.
Money management includes everything from making and sticking to a strict budget to never depositing more money than you feel comfortable with, and continuously withdrawing your profits.
Moreover, money management is based around the idea that you should never invest or trade for money that you cannot afford to lose and that you, under any circumstance, should try to chase your losses.
Trust us, it can be easy to be pulled into the excitement of forex trading but without proper control of your money, you won’t make it far. Because of this, we recommend that you put a proper money management strategy in place from minute one.
5 Advanced Tips
Those were our top five tips for new forex traders, and we believe they provide a good outline of what you will need to get started on your path to succeeding as a forex trader. But there is much more to learn, and we have also collected our top five advanced forex tips.
6. Develop a Strategy
Do you know what the one thing that separates professional day traders from everyone else is?
It’s the use of trading strategies. Whenever you’ve mastered all the basic knowledge you need to start trading forex, you should start looking into finding a strategy that suits you. Trading strategies differ tremendously depending on a range of factors such as market conditions, forex pairs, funds, platforms etc. Many times, professional day traders make use of several strategies at once.
The reason why strategies are so important is that they provide a clear path and will help support you and keep you focused. Strategies will also tell you when it’s time to cut your losses and move on to the next position.
In other words, our most important advanced forex trading tips are to learn more about trading strategies and then start developing your own versions that suit you. Also, don’t forget to reevaluate and backtest your strategies every once in a while to make sure that they are still effective.
Just because a strategy once worked doesn’t mean it will always work.
7. Use Stop-Loss on Every Trade
This advanced forex trading tip is simple but crucial. You should make it a habit to always use stop-losses for your positions for the simple reason that it will help minimize the risk you put yourself in.
A stop-loss will ensure that your positions will close automatically when the currency pair reaches a level that you don’t want to surpass. This can be either a profit level where you decide that you want to take your profit and move along. But in most cases, a stop-loss is used to sell an instrument to minimize losses.
Before you open a position, you need to calculate how much you would be willing to lose and at what price the instrument will lose support and continue in the wrong direction.
8. Dig Deeper Into Your Analytic Knowledge
As mentioned earlier, you will never stop learning as a forex trading. There are always new techniques, strategies, currencies, and concepts that one can test, and you want to always strive to get better.
That means that you should continue to develop your analytic capabilities. And don’t forget that the better you get, the more profits you’ll make. It’s really a win-win situation.
Two techniques that we suggest you master are hedging and scalping.
– Hedging is a technique used to minimize one’s risk exposure by opening several positions in different markets. By doing so, you increase your chances of making a profit, and at the same time, you give yourself the option of hedging your losses a bit. Some traders also hedge by trading in different markets at the same time. For example, you could focus most of your energy on the forex market while also trading a couple of “safe bet” stocks.
– Scalping is a term used to describe super short trades. Typically, a day trader keeps a position open for no longer than a couple of hours, and a swing trader might have a position open for a few days. However, a scalper might open a position for no more than a few minutes, and by using large amounts of leverage, they can make a lot of money quick. Just note that scalping carries more risk than regular day trading strategies and should only be attempted by seasoned traders.
In addition, in case you would ever feel like forex trading isn’t giving you enough or that you have learned everything there is to learn, you can always move on to other instruments.
Despite that many basic analytic aspects are similar, there are very different analytic methods used to trade stock indices or cryptocurrencies than forex. This means that you will open a world of new opportunities by switching instruments and markets.
9. Learn How To Control Your Emotions
Our last tip on how to make it as a forex trader has to do with psychology and emotions. The truth is that psychology plays a bigger part in all forms of trading than most people assume, and it is essential that you understand why as well as how one can cope with the pressure of trading.
In order to really succeed as a forex trader one needs to be able to stay calm and keep a clear mind even in the most stressful situations when large amounts of money are at stake. Otherwise, the risk for unnecessary mistakes and problems increases tenfold.
It’s not easy to learn how to control one’s emotions, but it is necessary if you want to make it as a professional trader. Therefore, you need to study the psychological effects that trading, and especially losing, has on the human mind so that you can learn how to control it.
Without a clear mind, you will not make it as a forex trader so don’t take tip this lightly.
10. Take it Easy
All this being said, we want you to acknowledge that learning how to trade forex as a professional requires time and dedication. Don’t rush the process and stick to a solid plan where you allow yourself to improve slowly, and you will be fine. And in case you ever need some help or have questions you need answers to, you can always visit BullMarketz.com.
That was our take on the 10 most important tips for forex traders, both beginners and experienced professionals. If you want to learn more about how you can optimize your opportunities on the forex market or any other market for that matter, we suggest you check out our comprehensive guides.
Lastly, make sure you only open an account with a safe and regulated forex broker that we have listed and recommended on this site in order to avoid problems.