The forex market is exciting, fast moving, and has plenty of opportunities to make money if you’re a good trader. Unfortunately, more often than not it also presents a huge opportunity to lose money if you’re not sure what you’re doing. Whether you’re just getting started or a seasoned pro that needs a little bit of a refresher, here are some forex trading tips that you can use to help make you money in the market.
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#1: Analyze, Analyze, Analyze
The most important part of any forex trade happens before you even enter the market. If you’re not analyzing your positions, taking into account your risk, or thinking about your trades before you make them, you might as well go to your local casino and put your trading account balance on the roulette table. Make sure that before you even start to trade you go over relevant market news and take the time to properly analyze each trade before you make it.
#2: The Trend is Your Friend
Practice with your forex account until you can recognize and exploit profitable trends. One important part of this is to always trade with the longer term overall trade, and avoid trading on retrenchments. Currency trading tip to make sure that you’re not trading on a retrenchment – look at a longer term graph than the one you’re trading on. So if you’re trading on the hour graph, take a look at the daily chart as well to see the overall trend.
#3: Trade for the Long Term, Not For a Quick Profit
People who have made huge amount of money off of forex haven’t made their fortunes overnight. Risking it all on a big bet is a sure fire way to sooner or later lose everything that you’ve worked so hard to earn. Instead, size your trades so that they are only about two to three percent of your overall trading account balance and focus on just making 20 pips a day. Over time those 20 pips will add up and you won’t get blown out of the market like many other traders.
#4: No Position is a Position
One of the most important pieces of forex trading advice that you can get is to sit on your hands unless there’s something to do in the market. Just because the forex market is active for twenty-four hours a day doesn’t mean that you always have to be in it. If you’re in doubt, don’t trade, instead study the market and use the knowledge you get in the future to make more, better, more profitable trades.
#5: Run Your Profits and Cut Your Losses
Equally important to staying out trades you’re not sure about is knowing when to stay in a trade and when to abandon it. One way that you can do this is to always have an exit plan before you enter a trade. Most times this will involve setting stop losses that will catch losing trades early.
But equally important is making sure that you don’t sell out of your winning trades too early. Ride them for as long as you can by moving your stop losses further and further up along the trend. Doing this means you’ll need a much lower percentage of successful trades to actually make money in the market.
#6: Know the Best Times To Trade
Try to Stay Away from Big News Breaks
Just because the forex market is open for 24 hours, doesn’t mean that all those hours are created equal. Usually the most activity, and thus the best times to trade, will be when the active trading hours of two currencies line up. So the best time to trade the EUR/USD pair would be when business hours in London and New York match up.
During certain times or points of the year, trading can be notoriously unpredictable as well, meaning that you should stay away from the market as much as possible. You will want to stay away from Mondays, month end, quarter end, and year end as many companies are switching money around for profit and tax reasons, making them incredibly hard days to predict currency movements on. Get out of the market early in the morning and around big news breaks as well. During these times the market can tend to trade on emotion, especially if unsettling news hits, and will once again be harder for any trader to predict.
#7: Pick One Currency and Strategy and Become an Expert in It
The best forex trading techniques aren’t some kind of black box that only a few traders know, the best ones are the simplest and this tip is no different. Pick a forex trading strategy and currency pair and become an expert in it. Initially, you should stick to simple strategies and the major currency pairs. By becoming an expert in a certain strategy, as opposed to using multiple forex trading systems, you’ll be able to recognize different patterns as quickly as possible and can react to them to make more favorable trades.
It’s just like they say on Wall Street, bulls make money, bears make money, pigs get slaughtered.
These forex trading tips and techniques aren’t the secret black box method that some other websites claim to give you, but in reality forex strategy isn’t about a secret method. It’s about knowing the market and how it is likely to react just a little bit better than the other traders. And most of all it’s about forex tip #8: Have a passion for the market.
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