7 Tips for Trading Foreign Currency
Whether they are new or seasoned traders, people always want forex trading tips. If you’re looking for tips like the ones on a horse race, I can’t help you! I can’t predict forex winners with certainty any better than I can be 100% certain of your horse winning the race. You’ll find lots more great information about forex trading at ForexInfoPlace.com
What I can do, however, is provide you with some basic forex trading tips to help keep you on track to make money trading foreign currencies.
1. Trade, don’t gamble. Trading is based on research and knowledge, whether yours or a trusted advisor’s. If you risk trading foreign currencies on hunches or without proper knowledge and research, you are not trading, but just gambling. Gamble on the horses, not with your forex account.
2. Use a demo account to practice trading before using real money. Fortunately, in forex trading that’s easy, because brokers allow you what they call a demo account. With a demo account you can trade as if it were real, making and losing money just as in the real forex world. No money actually enters into the picture, which means you can make all the mistakes you need to in order to learn. My advice to newbies: trade on a demo account for at least three months before you go live with real money. Not only that, but analyze your demo wins and losses carefully, learn from your mistakes so that you won’t repeat them with real cash.
3. Trade in the time frame that suits your style. Short time frames like 15 minutes makes for a lot of excitement and many traders love that. But that’s not for everybody, and particularly novice forex traders are well advised to look at longer time frames that provide more opportunity for analysis before making trading decisions.
4. As a beginner, go with the trend. Once you get some experience under your belt, you might decide to play the odd trade against the trend and you might even win. But beware, this way of trading is for the experienced, and not for the fainthearted even then. Learn more about trends here.
5. Study the charts of periods longer than your chosen trading time frame. This gives you a bigger picture and gives you a better chance to see and accurately identify trends. e.g. look at daily and weekly prices if you are going to trade in an hourly time frame. Foreign exchange price fluctuations are subject to occasional jolts and anomalies. But if you are keeping an eye on a longer time frame, you are more likely to see them coming, and know whether they are truly trend related or just a market anomaly.
6. Use sound money management principles. In forex trading, that means never risking more than a small percentage of your total trading account, such as 2-3%. Understand that you WILL lose on many trades, that’s just the nature of forex trading. When you do lose, remember you’ll need to make twice that amount very quickly just to stay even. Risk only small percentages of your trading account so it won’t be emptied by a few losses in a row.
7. Ignore your emotions when it comes to forex trading. Trading forex on the basis of emotion has brought many a novice trader down. Make your trades based on analysis, both technical and fundamental, not on panic or elation. Never trade on a hunch (see tip #1).
The world of forex is exciting, but it’s also a dangerous space. I recommend ongoing education in all aspects for as long as you are trading forex. One great place to start is with this free 7-part mini-course
