Introduction to the Foreign Exchange Market

One of the most important forex trading tips is to know the foreign exchange market. The foreign exchange market, also called the currency market or FX market, is a worldwide over-the-counter (OTC) or decentralised market for the trading of global currencies through futures contracts. To succeed as a forex trader, a lot of practice and discipline has to go into honing your skills, and performing self-evaluation on your forex trading of this asset class. Throughout your forex trading career, learn and improve your forex trading strategies to become a successful forex trader. This site contains expert advice from experienced and successful day traders, scalpers, position traders, swing traders and market maker traders to help you trade wisely, and earn Forex profits. Follow the forex trading tips in this site and you will be a step closer to foreign exchange trading profits.

Before You Use Forex Leverage, Learn The Basics

When you first open a forex trading account you should expect a steep learning curve. To manage your trade risk better, we recommend that you learn the basics of price action, the Interbank Market currency pairs, stop loss, trading plans, trading timeframes, how to avoid trading loss, how to set trading goals and plans and the difference between forex trading platforms. Don’t jump in and use forex leverage before you have a strategy you trust.

A lot of beginner traders make the mistake of getting started on the Forex market without adequate knowledge of how the currency pair relationships work. Many new forex traders begin day trading forex whilst still unsure which country’s currency they have predicted to go up and down when they buy and sell a Forex pair. To make successful trades, you need to understand how currency speculation works; the terms used and how to create trading strategies that help you predict price action against your base currency of choice. There are a lot of free beginner Forex trading courses, in video format and text, and a lot of expert forex advice available – take advantage of the resources available. Do your forex education before you trade forex. To become a profitable, leveraged trader, you need to be confident in your knowledge and forex trading strategy.

Currency Trading Mindset And Philosophy

Currency trading is not as complex as most people make it out to be. You do not have to be an economics professor, understand everything about European, Hong Kong and US central banks, or a maths genius to grow wealth while currency trading. You need well researched, carefully observed trading practices and goals and clarity of vision to become a successful leveraged forex trader. In your forex trading journey, do not fall into the trap of over-analysing, over-explaining or rationalising your forex trading failures. A failure is a failure regardless of the circumstances that led to it. You can’t control interest rate rises, international trade treaties, Japanese economic policy or approaches to budget deficits. You can work to understand price action, study and get tips on long-term market analysis, look for good entry points, and get a feel for forex market psychology. As long as you are learning from your foreign exchange market trading and getting better you are becoming a winning forex trader.

Currency Pairs And The Importance Of The USD

The most traded currency pairs in the FX market are linked with the US dollar and other major currencies like the British pound (GBP), New Zealand dollar (NZD), Japanese CN (JPY), Swiss Franc (CHF), Canadian dollar (CAD), Australian dollar (AUD), and the Euro (EUR). Our suggestion is always to begin by trading major currency pairs.

The most commonly traded currency pairs are:

  • USD/CHF.

Getting Started Creating A Trading Plan

One component that influences successful foreign exchange trading is the creation of a forex trading plan. This forex plan should include your risk tolerance level and risk management, trading method and evaluation criteria, and forex trade profit goals. After creating your plan, ensure that each forex trade you consider is within the parameters of your forex trading plan. You may want to use forex signals to help with your plan, or to check your foreign exchange analysis. Remember, the essence of a trading plan is to help you to make rational trading decisions – use advice, guidence, manuals, instrcution from forex experts.

If you are a beginner trader, you may have very little forex knowledge. We recommend that you get advice from an expert when developing a forex trading plan and that you use a demo account before moving to a live trading account. We suggest that you don’t leverage forex until you are confident or you could lose money.

Understanding Money Management And Timeframes

To find forex trade opportunities it’s best to learn technical analysis as well as fundamental analysis, and to interpret the price action on the daily charts timeframe. To understand forex trends and their strengths, you need to take into consideration that currency pairs move down and up a lot: they oscillate. The trade research you have set up should provide you with information on how strongly a currency pair is trending. You could also spot the signs of a retracement if you do technical analysis.

There is nothing simple about trading in currencies but you must have a fair idea of the probability of a forex trade being profitable based on your forex analysis. If at any point you are uncertain about a forex trade, do not buy or sell the currency pair.

Using Trading Timeframes To Make Better Trades

It doesn’t matter if you are a Long-Term Position Trader, a Day Trader or a Swing Trader, the approaches you take to the trading market should be top-down. In simple terms, this means that you should begin with high time frame charts and work your way down to lower forex trading time charts. Doing this will give you a broader view of currency pair price action. Begin your trading day with a review of the forex markets, before looking at your trading strategy for the forex trading session.

One of the biggest mistakes you can make as a beginner forex trader is to constantly change your trading strategy. If you have a logical well researched forex trading plan in place, we recommend that you master it before moving on to a different trading method.

The Forex Market Trading Hours

The currency trading market is made up of 15 independent global exchanges that are open weekly from Monday to Friday. The four major exchange markets are in Tokyo, Singapore, London and New York. To increase your profits, you have to understand the best trading times in each of these exchanges. If there is more than one exchange market open, it spikes volatility and increases trading volume. Volatility is the rate and extent at which currency or equity prices change – in the forex market, high volatility level means greater profit opportunities.

From a traders perspective, these are the vital trading windows:

Tokyo: 7 PM to 4 AM (East Standard Time – EST)

London: 3 AM to 12 PM (EST)

Singapore: 3 PM to 12 AM (EST)

New York: 8AM to 5 PM (EST)

Defining Your Trading Style And Goals

Trading goals are set to provide you with direction and help you organise your resources and time so that you can get the most out of trading on the forex markets.  The trading style you choose on the other hand influences your trading goals – there are various trading styles and methodologies that you can use: Long-term trader , short-term trader, day trader and so on. You could also combine any of the trading styles – that is, somewhere in between the short-term and long-term trading style. For example, your trading plan might be to earn £100 daily doing multiple short term trades – or you might decide to make a big trade leveraging on your predictions for more profit.

Support and Resistance

Support and resistance are terms that are used to describe important price levels where sellers and buyers have expressed interest and traded in a volume causing prices to stop and reverse, creating a key swing level.  Support and resistance is a core concept in forex trading. These levels are used by traders to gauge future price actions and when sellers and buyers will enter the market in the future. In addition, horizontal price lines can be mapped from where price traded and reversed, to outline a key support and resistance zone that should be monitored.

Keep A Trading Journal

Approaching trading analytically isn’t just about the technical and fundamental analysis of price trends, or designing trading strategies. It starts when you place your first investment in open position and when you make your first mistake. Yes, you need expert understanding of the Metatrader platform or any other platform you are using for foreign exchange trading. But successful traders also keep a journal of their trading activity, so they can analyse their successes and trade mistakes in order to discover strategies that will work better in the future. A trading diary (a trading journal), will help you keep track of your daily trade activity- you can take note of your actions all through the day, the results of your efforts and details of your trades (or non-trades). With a trading journal, you can trace the success of your trading strategies over time and your long term reward to risk ratio. A trading journal is a tool for continuous self-evaluation and learning on your trading journey. If you do not currently keep a journal, you should begin to do so now.

How To Choose A Trading Platform Or A Broker

Selecting a forex broker can be a challenge, especially if you do not know what to look for. 

So, here are some expert tips to help you select the right Forex platform. Things to look out for:

Confirm Credibility

Thankfully, checking the credibility of a broker is not difficult. There are regulatory agencies all around the globe that credible brokers are registered with. They include (by country): 

  • United States : Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA)
  • United Kingdom: Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA)
  • Australia: Australian Securities And Investments Commission (ASIC)
  • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN) 
  • Switzerland: Swiss Federal Banking Commission (SFBC)
  • Canada: Investment Information Regulatory Organisation Of Canada (IIROC)
  • France: Autorité des Marchés Financiers (AMF) 

Make sure that you confirm that the forex broker you trade with is a member of any of the regulatory bodies mentioned above.

Choose Affordable Transaction Fees

Whenever you make a trade there is a commission or spread that you have to pay. So, it is wise for you to look for good bid price vs ask price spreads. If you require tight spreads for the trading type you choose trading costs will be vital.  The goal is to find the right balance between transaction cost and security. If you do a lot of forex trades daily, you will need to keep transaction costs low in order to maximise profits

Ease Of Withdrawals And Deposit

The reason your broker keeps your money is to make trading easier, so it shouldn’t be hard for you to get withdraw profits. The withdrawal process should be quick and easy.

Features Of The Trading Platform And Ease Of Use

When choosing a forex broker, you need to be sure of what features come with their trading platform and if they will be right for you. Do they have a free newsfeed? Do you have ready access to information that will help make your trades better? Are exchange rate charting and technical tools easy to use? Do they have a demo trading account to try?

Execution Speed

A pip difference in price action can make or break a forex trade. Ensure that the trading platform you choose is executes trades instantly. This is especially important for scalping and short trades.

Smart Trading Tips

Do Not Overcomplicate Trading -Focus On Price

As you go through your trading journey, you will come to realise that using indicators while trading can be counter-productive. Many successful traders will tell you that the indicators on a price chart are a derivative of price itself. Everyone is trading the same indicators. In the forex market, getting in before other traders can be the difference between winning or losing a trade – we therefore recommend that you try to trade using naked price charts and analyse price action from your chart.

Define Entry And Exit Points (stop loss)

Trade entry and exit points are a little bit complex and often take a lot of money and time to master.

The trick is to position your stop losses, at a safe distance away from your entry price. If stops are placed too close, you run the risk of a stop- out for a loss before the market could move in your favour. Your trade predictions could be right but because your stop loss was too close, you stopped-out before exchange rates moved how you expected. Stop loss orders are there so that you can prevent big leaks while trading. They can be used to fully position a trade for bigger profits at the same time protecting against unanticipated reversals.

Do Not Add To A Long Position

If there is one thing that you should take away from this site, it is -never to add to a losing position. Whether it is to average up a losing short position or average down a losing long position – try to also avoid correcting a losing trade by doubling down with a lower entry price. Sticking to an original trade idea even when it is losing is a recipe for disaster.

Manage Your Emotions When Trading

Do you often get emotional while trading forex? This can cloud your trading decisions and cause you to make repeated bad trades.  The elements that make traders successful are their discipline, trading psychology and mindset -it is usually not about the Forex market. Emotion management is an essential skill that you need to master as a forex trader.

Some Trading Statistics

Spend 99% of your time learning to trade and the remaining 1% on actual trading.

If you make 10 trades, and six of them are winning trades and the other four losing trades, your percentage win ratio is 60% or 6/10.

As a Day trader, keep your risk ratio to 1% or less.

If you set your risk ratio to 1% per trade, you will need at least $500 in your account (that is five dollars multiplied by hundred).

Do not risk more than 2% on any single trade.

On A Final Note

Let’s do a quick recap – to succeed as a forex trader, each trade needs to be approached objectively, you must regularly study and reviews your strategies, constantly expand your knowledge base and keep your risk ratio reasonable. 

It is important to note that forex trading is not a get rich scheme – even though the profit potential is huge. Maximization of forex trade profit is a long-term plan, so be patient.