13 Forex Trading Tips Every New and Experienced Trader Must Know

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Some of the best Forex trading tips that can lead to trading success are usually the simple ones.

Given that Forex market is popular for both experienced and beginning traders, you know there are quite a few tips available for all traders

With low initial deposits depending on your account type, free trading software from your Forex broker, and virtually 24 hours access, it’s extremely tempting for people to jump in with both feet without having much in the way of trader training.

This page is dedicated to some of the best Forex trading tips covering all currency pairs taken from not only real world trading experience but also from the many  Netpicks “family members” who’ve enjoyed success trading one of our trading systems.

Think of it as a checklist you can follow before you start trading to help you get on the right side of success.

 

Top 3 Tips For Forex Trading Successfully

When a trader begins to learn Forex trading, we teach them that there are 3 broad categories that make up “what it takes” and these are something that successful currency traders have not only understood, but aim to excel at.

When a Forex trader combines these three pillars of success, they stand a good chance of finding trading success

  1. Have a Forex trading strategy that has an edge in the market
  2. Specialize in having excellent money management skills
  3. Know the effects of psychology as it relates to trading

Traders can lump virtually any trading tip into these top 3 because these are things you must focus on as a currency trader.  They have a direct effect on your success or failure.

If you need the basics such as charting information, brokers, or even Forex demo trading and other trading tools, you can download that information for free from this link.

 

Forex Trading Tip #1

Have a trading strategy that has been tested and proven to have an edge in the markets.

Before we get going I want to mention something very important:  There is no holy grail in Forex or any other market regardless of what the emails and marketing websites say!  If your back test looks good on paper, remember that it is not an indication of future results.

By back testing, you are assuming that what showed a successful result in the past will do so in the future.  Forward testing your trading strategy, where you trade inside of demo account with your Forex broker, can also help show if your strategy has a positive expectancy over time.

Please remember that live trading in the Forex market is much different than back testing.  Do not be surprised if the results you get trading in a real trading account are different.  It is vital that you have a trading plan that can help keep you following a rule set for every trade.

Focus on a Forex trading strategy that you can

  • understand,
  • replicate
  • prove to have an edge over time

Any system or method based on the mechanics behind price, does not totally rely on lagging trading indicators, and can be easily explained is something you may want to investigate further.

A trading strategy, regardless of the market you trade, should have the following three important questions answered:

  • Setup – What constitutes a valid trading opportunity?
  • Trigger – Once the setup occurs, how are you triggered into the trade?
  • Exit – Where will you exit your trade if it is a winner or a losing trade?

I am going to use a supply and demand trading example to explain what a trading setup is.  Supply and demand is a technical analysis approach that also uses price action to find and enter a trade.

Technical analysis is a market analysis of the price action and structure on a chart such as support and resistance.  The theory is that the markets tell a story and moves are repeatable.  You can also look at analysis such as momentum and mean reversion to help with your strategy as you learn more about what can form a trade idea.

Supply and demand in this regard simply refer to the battle of the bulls, bears, and the imbalance caused by having one group being able to exert control over a market.

Forex trading tips supply and demand

This is an actual Forex trade setup and for this trading tip, I wanted to use one that was actually a profitable trade.

  1. I used a trend line to show the price traded inside a channel and then spiked up and broke through the top of the line before dropping hard.  When this occurs, it highlights an important area to watch if/when price comes back to it.  You can see the drop was fast and hard which shows – an imbalance of buyers/sellers where sellers totally overwhelmed the buyers. (this is KEY)
  2. Price takes about two days before it drives hard to the bottom of the yellow zone that was started way back at number one.  This becomes our setup although in this instance, a sell limit was set a few pips below the supply area.

The larger time frame for this chart was sitting at a supply level and our level here is right up against it.  Buying into a supply level (or selling into a demand level) when right on top of it will generally be a hard trade to succeed with.

I want to draw your attention to the large green candle.  It should be obvious that a large number of contracts were bought to drive price this fast and hard in a 30 minute period.  The high represents the last buyer who then saw price plummet and take them into a losing trade.

Without a trading strategy, it’s easy to justify buying that large candlestick because it is showing momentum in the market.  I would argue too much momentum but that is another topic.

With a trading strategy, you would not have been a buyer and this highlights why an actual trading strategy is paramount to your future as a trader.

The setup occurred when the price came into the zone we were watching.

Trade Trigger

In this trade, the trigger is actually price just coming into the zone.  Let’s say that you need a little more confirmation and require an actual trigger to get you into the move.

Important: Confirmation can often require price moving in your direction which could increase your stop size thereby lowering your position size.

trade trigger

Two trade triggers can be seen on this chart.  The MACD is a momentum indicator and when you see the histogram drop lower, you can use that for your trigger into the trade.  This indicates that the upside momentum is starting to lessen.

This is NOT a holy grail trading entry (nothing is) but taking into consideration our trade setup and what it represents, it’s not a bad play.

We also have a mini-trend line connecting the lows of the candles and you may elect to simply short this market upon the break of that line.

No trade entry is the perfect entry so we can just use what price is showing us.

This chart has inside candlesticks and these same candlesticks don’t show with certainty whose in control.  We can tell that momentum is slacking and given the nature of this setup, just shorting when the market shows weakness is also a viable trading decision.

This is not a complex trading method but has proven to be very effective and allows larger position sizes due to the “tight stop” for risk management that is usually used.  It has both aspects that we need:  a setup and a trigger.

If your trading system does not have these three variables, seek out a better system.

The main drawback of this type of trading is people have an issue quantifying the setups.   For those people, a trading system by Netpicks may be something to consider.

All the setups are mechanical with a little bit of art, which means when certain variables are met, you are informed of a trading opportunity. All targets, stops and entries are printed for you and that helps keep you consistent in your trading.

Here is a great video showing Forex trades using our very popular Counterpunch Trader that can be used on many currency pairs.

 

Forex Trading Tip #2

Money management is not the most glamorous Forex topic but without a full understanding of risk and leverage, you run the risk of account ruin.

Nobody is able to tell you what risk to use per trade but the standard quote is usually 1-2% of your account balance. I will add two things to that.

  • .5% is conservative and allows new traders to take the losses without too much account damage.
  • Consider using the balance +/- the p/l of any open trades.

This can be an in-depth topic with examples and “what ifs” however following two basic account management tips can go a long way in protecting your account from a string of losses and ending your Forex trading career.

  1. What you are thinking of risking, cut that amount in half.
  2. Ensure your stops are not just a suggestion….but a demand that will be executed.

While the majority of traders simply use their account balance as a sign of success or failure, it does not go far enough pointing out where you can improve. It also doesn’t show you where the bleeding is happening with your trading.

A free software application is available called the Ultimate Trade Analyzer and you will see this software that you can download right now, is feature rich.

  • Important Trade Statistics like Profit Factor, Expectancy, Expectation, Avg Wins/Avg losses, Net Profit, Number of Trades, and more…
  • Wins vs. Losses; learn their characteristics so you can make subtle yet powerful changes to your trade approach
  • Learn the best time to quit trading each day with our “Power of Quitting” Analysis tool for both your am and pm session trades

 

Forex Trading Tip #3

Mechanical and automated trading have their pluses especially when you realize that trading psychology would not be an issue.

  • We would have no issue sticking to any type of trading method whether it is trend trading or any of the numerous mean reversion systems.
  • Our trades would execute and either our targets would be hit for profits or our stops would be hit and protect us from over sized losses.
  • We would risk the appropriate amount for our account size and trading system expectations.

Stating the obvious – We are human.

We are all subject to emotions and doing things that we know are not good for us. We make excuses why we do things.  For instance, taking a few losing trades and then seeing price bounce back, we decide to ignore the stop the next time we trade.

This one doesn’t come back and your account is drained.

This happens all the time!

Again, this is such a vast subject and there is no way to do it justice in a blog. However, what I am about to say was one of the most important Forex tips I ever received.

Why?

Because it encompasses so many things such as:

  • Follow your tested and proven trade plan
  • Use stops to protect your account
  • Ensure your risk per trade can withstand a string of losing trades
  • Don’t over-leverage

Embrace the fact that winning trades and losing trades come in random distribution.

This means that we don’t know if the next trade is going to be a profitable trade or whether price will hit our stop loss  In fact, we don’t know if the next 3 or 5 trades will win or lose.

What we do know is that it will win or lose – we will have a result.

Can you see how understanding that basic fact makes it crazy to risk too much on the next trade?

  1. How it makes moving your stop further from price is not a smart thing to do?
  2. How skipping the next setup even though it is a perfect trade plan setup is senseless?
  3. How increasing your risk % on a sure thing is a suckers bet?

You have to give yourself a fighting chance with every trading opportunity that presents itself.

Embrace not knowing and do everything that makes up smart trading on every single play.

  • You don’t know if the next trade will return the recent dollar losses back into your account.  It makes no sense to skip it.
  • You don’t know if the price will bounce back so it makes no sense to not honor your stop.
  • You don’t know if the next trade will be a loser (with slippage) giving yourself a larger pip loss.  Makes no sense to increase risk.

In my opinion, how to trade Forex successfully means doing everything you are supposed to do on every trade.

Every trade, give yourself the goal to improve on every aspect of the three categories mentioned above.  It is my hope that this assembly of Forex trading tips helps refocus you to act and think like a professional trader, whether you are an experienced trader or just starting.

 

10 Forex Trading Tips You Should Also Know

The three things I discussed earlier are the most important tips for Forex trading I could share with you.  This is an additional 10 trading lessons that have shown to be important to all Forex traders.

  1. Use alerts to allow you time away from your trading screen so you don’t miss a trading opportunity.
  2. Don’t trade when you are physically or emotionally drained.
  3. Let the magic of compounding build your account.
  4. Record your trades and thought process through screen recording software.
  5. Leave your ego someplace else.
  6. Prepare for electricity or internet failure so you are not stuck in a trade.
  7. Set a time and place for your trading study.
  8. Read trading books.  Market Wizards and Trading In The Zone.
  9. If you lose sleep while in a trade, you risked too much.
  10. Don’t give up.

TRADING PRICE PATTERNS PDF

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CoachShane

Trader at Netpicks
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.

2 Responses to “13 Forex Trading Tips Every New and Experienced Trader Must Know”

  1. CoachShane

    Hey Rufus. The longer the time frame…the better actually. I don’t bother with any structure on less than a 1 hour chart. As for a smaller time frame to enter, it all depends on the instrument however as a rule of thumb….3-4x lower. Hope that helps.

    • rufus

      thanks coach shane, it helps alot! appreciate the reply.