At MarketClub we cover all major and minor Forex pairs in real-time, and their popularity is
growing by the day. Traffic to our Forex pages is almost double what it was less then two
years ago, and with all the great Forex material (including this post by Bill Poulos) I
asked Jason Gospodarek fromFastPips.com to throw his knowledge into the mix and give us
thirteen Forex tips that we ALL can use! Please enjoy the article and if you have any
additional tips we want to hear them!
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At FastPips.com our goal is simple. We want to help you learn how to create a profitable
trading business by executing low-risk, high-reward trades in the best market conditions
possible.
#13: Back-test, but be logical. Back-testing a given strategy can prove priceless when done
correctly, but remember to take the results with a grain of salt. Be especially wary of
trade results shown on websites claiming astronomical gains since most of these results
simply are not attainable under live market conditions for many reasons.
#12: Always analyze similar pairs in the forex market before placing any trade. Similar
pairs can be defined as any tradable currency pair containing 1 of the 2 currencies you are
about to trade. For example, by looking at no less than 4 US Dollar pairs before trading,
one can determine if the pair will be moving based mostly on the US Dollar or the opposing
currency. This can easily be done with the Japanese Yen and others as well.
#11: Be wary of trade ideas coming from other individuals or groups in the many online
trading forums, blogs, or chat rooms. Only evaluate trade recommendations from trusted
parties who have a proven track record of success. Remember this is your business, and to
have a consistently profitable business, you need to execute reproducible trades based on
your own strategies and ideals. Don’t build your house on sandy soil; lay a good foundation
of continuing education and the rewards will come many times over.
#10: Longer-term charts (ie. monthly, weekly, daily) have logarithmically more importance
upon technical analysis than shorter-term charts (ie. 1 minute, 5 minute, 15 minute). For
example, a support or resistance level on a daily chart will hold much more importance than
a similar line than a 5 minute chart. Most reputable traders will recommend trading on
longer term charts, especially for those who are new to trading or have limited time to
trade due to other commitments. Find your comfort zone and stick with it until you become
consistent; even a slight edge in this market can set you free financially.
#9: Do not use any trading robots, expert advisors, or other “black box” automated trading
software until you learn how to trade on your own first. Educating yourself is the key to
success; deep roots will equal a tall tree that can weather any storm.
#8: Trade with a friend, group, partner, or mentor when you begin your journey of learning
the forex market. Many of the glamorous ideologies of forex traders showered in riches come
from high-risk, difficult to reproduce strategies. The way to often become most profitable
in this market is to have consistency, be disciplined, and to repeat this over and over and
over again. Forex trading, done properly, is not intended to be flashy.
#7: Be sure to use a forex broker with great service and support, along with low spreads.
With the recent regulations we are much more protected against possible broker-related
issues, but many traders are still paying much higher spreads than average when placing
trades. Do your research on forex brokers to analyze not only the safe, financially sound
companies, but also those that allow the lowest fees. Paying the bid/ask spread in the forex
market is just one of the costs of doing business, but with the extreme level of competition
in today’s marketplace there is no need to accept paying even 1 pip more than you should
elsewhere.
#6: Have a backup power supply and internet access available at all times when you are
trading. This can be as simple as a battery-powered laptop with a wireless access card.
Don’t rely solely on the phone number of your broker as if there is a company-related
trading issue; their lines will likely be slammed busy. Bottom line: be sure to have some
redundancy incorporated into your trading plan; treat this like a true business and it will
reward you like one.
#5: Break your trade order into 2 or 3 smaller orders to give yourself more control, both
actual and psychological. As most forex brokers do not charge commissions to trade this
market, they earn their fees through the bid/ask spread; you have no extra cost of placing 3
small orders rather than 1 single large one. Doing this allows you to place tighter stops on
some orders, while adjusting the profit taking on others. Closing part of an order will give
the same effect, but by having a few live at the same time, it is easier psychologically to
set them and let them run.
#4: Trading profit comes from 1/3 psychology, 1/3 money management, and 1/3 trading
strategy. It’s easy to get caught up in the “next best thing” or the potential of finding a
“holy grail” system, but remember that most of your profits come from learning the things
that are not quite as exciting. Trading psychology and money management are critical to any
success in the forex market; without them you will be grouped with the 95% of those who lose
their capital time and time again. Money management is the key to unleashing potential for
compounding profits; it is an absolute necessity to learn. Do your research on the most
highly coveted trading psychology texts and dig in ASAP.
#3: Be aware of world news releases. Even if you prefer to not trade news events, be certain
to know when the major events are planned to take place. As a second line of asset
protection to your business, a good live news feed is also recommended when you are trading.
Knowing what is going on in the world is one of the most critical keys to forex trading
success; without this knowledge, your chances of success are limited.
#2: Always use a well planned stop loss when placing any trade and never, ever, move it
further from your entry point for any reason. Although it is a simple rule to put on paper,
it’s often difficult to follow…always follow this rule.
#1: Always trade any new strategy in a demo account before going live in a real money
account. Many traders simply become gamblers by placing trades live without the proper
testing and education necessary to place the odds in their favor. It is also all too common
for traders to have excellent results in a demo account or with paper trading, then lose all
their capital once they go live in a real money account. Be realistic and treat your demo
trades as real funds; that is the only way for a demo account to work over time. If you
begin to have a winning pattern in the demo account, be 100% certain to follow all the rules
exactly in your live account. Often, a good transition is to begin with a demo account, then
go to a live mini or micro account where very little capital is risked before trading your
regular sized account. Many times one can make the transition in trading psychology from
demo to live when taking the added step of testing the proven system by trading very small
lot sizes first.
Although these few trading “nuggets” are only the tip of the iceberg, I hope that they can
pique your interest enough to warrant further research and attention. I wish you the best in
your trading!
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