Skip to content Skip to footer

Top Forex Trading Tips

The forex markets are estimated to be the biggest markets being traded globally. About 5 trillion USD is traded daily. The sheer liquidity in these markets makes forex trading particularly appealing.

To trade profitably, it is critical to control the natural risk involved in forex trading. And the most efficient way to do that is to learn with the intent to obtain a quality education in it. 

That means before starting to trade, someone who is a beginner should spend time reading up on how forex trading and the market works. 

How to use the available platforms. And observe how the markets trade over a while with a Demo account in hand. There are many websites, books, and other resources that give beginners all the knowledge they need about forex trading.

However, the best forex trading teacher is experience. It is very easy for traders to think the market will come back around in their favor when they make a blunder. Hope is never a healthy strategy, but unfortunately many will fall prey to this trap, and the likely (eventual) result is the demise of the trading account.  

There is a famous – but painfully true – statement from John Maynard Keynes about investing: 

“The market can stay irrational, longer than you can stay solvent.”

 In other words, there is no use in saying that the market is acting irrational and that it will come around to go in the direction favorable to the trader. This is because extreme moves define capital markets in the first place.

Getting Started

To get started, one needs to understand what is being traded. Beginners very often tend to jump in and start trading anything that looks profitable (see Panic Buying or FOMO). Of course what may seem profitable may reverse direction very quickly, especially in the forex markets (or any volatile market). Out of fear, a beginner trader might then try to trade in a different direction. And these random trades in both directions will often lead to more losses.

Learning how to trade online

Therefore, understanding the nature of how currency markets fluctuate and how the trader executes the trades will be a major determinant of whether the trader makes money or not. 

For example, a currency may be bouncing upward after a large fall. This may cause new traders to try to “catch the bottom.” Experienced traders will tend to dissuade the bottom catcher by a counter saying of “Never catch a falling knife.” 

Another component of managing risk is to keep emotions under control. When the trader feels fearful, greedy, or over-confident mistakes become inevitable. Price charts are meant to be read with a logical mindset that only sees the presence or lack of potential for success, and not be a matter of excitement.

Experienced traders warn their more inexperienced counterparts that, if pulling the trigger on a trade feels emotional in any way. Then that action should be re-evaluated to determine the reason for going into that trade and try to regain an objective mindset.

Related: Online Trading Benefits

Best Forex Trading Tips

1. Get familiarized with the forex markets

Education is the best way to manage the risk involved in forex trading. The importance of educating oneself on the forex markets cannot be over-emphasized. 

The beginner trader should take the time to study currency pairs and to identify what affects them before risking capital. Investment in learning can potentially save the beginner trader a lot of money and grief. 

2. Make a plan and stick to the plan

Creating a trading plan is an absolutely essential step in the path to successful trading. The trading plan should include your profit goals, risk tolerance level, methodology, and evaluation criteria. Once the trading plan is in place, the trader must ensure that each trade falls within the plan’s parameters. 

The trader should bear in mind that he is most likely to be rational before the trade is placed and most irrational after the trade is placed.

3. Forecasting the forex markets

Fundamental traders trade based on news and other financial and political data. Whereas technical traders prefer technical analysis tools such as moving averages and other indicators to forecast market movements. 

Related: Seasonal Trading 

Most traders use a combination of the two. Fundamental analyses tend to point to the likely trend. Whereas technical analyses tend to pinpoint the good entry and exit points within the trend.

4. Know the trading limits

This is a very simple but yet important risk management technique that determines success. Knowing how much to risk on each trade, setting the leverage ratio in accordance with the trader’s needs, and never risking more than one can afford to lose are vitally important steps in a trade setup. 

5. Setting limits and stop losses 

Beginner traders normally do not have the time to sit and watch the markets every minute of the trading day. They can better manage their risk and protect potential profits through stop and limit orders. 

Stop losses will close off the trade at a predetermined level. In that way, the trader is able to determine the maximum loss that is incurred in that trade. 

Although these pending orders may not necessarily limit the risk for losses. It can, however, help to determine the maximum loss that can be incurred. Thus helping to preserve capital for future trades. 

6. Keep Emotions in Check

Emotion should not be allowed to get in the way of successful trading. It is probably not advisable to take “revenge” trades after a losing trade, and trying to go all-in and try to make it back in one large trade. 

It is more advisable to stick to the trading plan and try to recover a little at a time. Rather than to suddenly find oneself with two crippling losses.

7. Slow and steady wins the race

A key to successful trading is consistency. All traders have lost money, but if a trader maintains a positive edge. He will have a better chance of coming out on top. Educating oneself, creating a trading plan and sticking to it may be the best way to ensure success in the long run.

8. Continuous improvement 

While consistency is important, it is now wrong to re-evaluate the trading plan if situations change.  As the experience of the trader grows, his needs may change, and therefore his trading plan should reflect his current goals. There is no point in sticking to a plan that is no longer relevant to the present situation.

In conclusion, a solid education in forex, proper planning, objective research, good trading habits, and emotion control will provide a good chance for the trader to be a success in forex trading. Additionally, you can learn from the pros directly by learning about social trading and joining trading communities like TradeGateHub. Finally, put everything into practice by opening a free demo account.