Forex Trading Tips – 20 things you need to

know to be a successful trader

Published: June, 2009.
Updated: November, 2019.
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Forex has caused large losses to many inexperienced and undisciplined traders over
the years. You need not be one of the losers. Here are twenty forex trading tips that
you can use to avoid disasters and maximize your potential in the currency exchange
market.

1. Know yourself. Define your risk tolerance carefully.

Understand your needs.
To profit in trading, you must recognize the markets. To recognize the markets, you
must first know and recognize yourself. The first step of gaining self-awareness is
ensuring that your risk tolerance and capital allocation to forex and trading are not
excessive or lacking. This means that you must carefully study and analyze your own
financial goals in engaging forex trading.

2. Plan your goals. Stick to your plan.

Once you know what you want from trading, you must systematically define a time
frame and a working plan for your trading career. What constitutes failure, what
would be defined as success? What is the time frame for the trial and error process
that will inevitably be an important part of your learning? How much time can you
devote to trading? Do you aim at financial independence, or merely aim to generate
extra income? These and similar questions must be answered before you can gain
the clear vision necessary for a persistent and patient approach to trading. Also,
having clear goals will make it easier to abandon the endeavor entirely in case that
the risks/return analysis precludes a profitable outcome.

3. Choose your broker carefully.

While this point is often neglected by beginners, it is impossible to overemphasise
the importance of the choice of broker. That a fake or unreliable broker invalidates all
the gains acquired through hard work and study is obvious. But it is equally
important that your expertise level, and trading goals match the details of the offer
made by the broker. What kind of client profile does the forex broker aim at
reaching? Does the trading software suit your expectations? How efficient is
customer service? All these must be carefully scrutinised before even beginning to
consider the intricacies of trading itself. Please refer to our forex broker reviews to
find a reliable broker that suits your trading style.

4. Pick your account type, and leverage ratio in accordance

with your needs and expectations.
In continuation of the above item, it is necessary that we choose the account
package that is most suited to our expectations and knowledge level. The various
types of accounts offered by brokers can be confusing at first, but the general rule is
that lower leverage is better. If you have a good understanding of leverage and
trading in general, you can be satisfied with a standard account. If you’re a complete
beginner, it is a must that you undergo a period of study and practice by the use of a
mini account. In general, the lower your risk, the higher your chances, so make your
choices in the most conservative way possible, especially at the beginning of your
career.

5. Begin with small sums, increase the size of your account

through organic gains, not by greater deposits.
One of the absolutely best tips for trading forex is to begin with small sums, and low
leverage, while adding up to your account as it generates profits. There is no
justification to the idea that a larger account will allow greater profits. If you can
increase the size of your account through your trading choices, perfect. If not, there’s
no point in keeping pumping money to an account that is burning cash like an
furnace burns paper.

6. Focus on a single currency pair, expand as you better

your skills.
The world of currency trading is deep and complicated, due to the chaotic nature of
the markets, and the diverse characters and purposes of market participants. It is
hard to master all the different kinds of financial activity that goes on in this world, so
it is a great idea to restrict our trading activity to a currency pair which we
understand, and with which we are familiar. Beginning with the trading of the
currency of your nation can be a great idea. If that’s not your choice, sticking to the
most liquid, and widely traded pairs can also be an excellent practice for both the
beginner and the advanced traders. Also, following the news and rates of major
currency pairs is always important for all traders.

7. Do what you understand.

Simple as it is, failure to abide by this principle has been the doom of countless
traders. In general, if you’re unsure that you know what you’re doing, and that you
can defend your opinion with strength and vigor against critics that you value and
trust, do not trade. Do not trade on the basis of hearsay or rumors. And do not act
unless you’re confident that you understand both the positive consequences, and the
adverse results that may result from opening a position.

8. Do not add to a losing position.

While this is just common sense, ignorance of the principle, or carelessness in its
employment has caused disasters to many traders in the course of history. Nobody
knows where a currency pair will be heading during the next few hours, days, or even
weeks. There are lots of educated guesses, but no knowledge of where the price will
be a short while later. Thus, the only certain value about trading is now. Nothing
much can be said about the future. Consequently, there can be no point in adding to
a losing position, unless you love gambling. A position in the red can be allowed to
survive on its own in accordance with the initial plan, but adding to it can never be
an advisable practice.

9. Restrain your emotions.

Greed, excitement, euphoria, panic or fear should have no place in traders’
calculations. Yet traders are human beings, so it is obvious that we have to find a way
of living with these emotions, while at the same time controlling them and
minimizing their effect on our lives. That is why traders are always advised to begin
with small amounts. By reducing our risk, we can be calm enough to realize our long
term goals, reducing the impact of emotions on our trading choices. A logical
approach, and less emotional intensity are the best forex trading tips necessary to a
successful career.

10. Take notes. Study your success and failure.

An analytical approach to trading does not begin at the fundamental and technical
analysis of price trends, or the formulation of trading strategies. It begins at the first
step taken into the career, with the first dollar placed in an open position, and the
first mistakes in calculation and trading methods. The successful trader will keep a
diary, a journal of his trading activity where he carefully scrutinizes his mistakes and
successes to find out what works and what does not. This is one of the most
importance forex trading tips that you will get from a good mentor.

11. Automate your trading as much as possible.

We already noted the importance of emotional control in ensuring a successful and
profitable career. In order to minimize the role of emotions, one of the best courses
of action would be the automation of trading choices and trader behavior. This is not
about using forex robots, or buying expensive technical strategies. All that you need
to do is to make sure that your responses to similar situations and trading scenarios
are themselves similar in nature. In other words, don’t improvise. Let your reactions
to market events follow a studied and tested pattern.

12. Do not rely on forex robots, wonder methods, and

other snake oil products.
Surprisingly, these unproven and untested products are extremely popular these
days, generating great profits for their sellers, but little in the way of gains for their
excited and hopeful buyers. The logical defense against such magical items is in fact
easy. If the genius creators of these tools are so smart, let them become millionaires
with the benefit of their inventions. If they have no interest in doing as much, you
should have no interest in their creations either.

13. Keep it simple. Both your trade plans and analysis

should be easily understood and explained.
Forex trading is not rocket science. There is no expectation that you be a
mathematical genius, or an economics professor to acquire wealth in currency
trading. Instead, clarity of vision, and well-defined, carefully observed goals and
practices offer the surest path to a respectable career in forex. To achieve this, you
must resist the temptation to over explain, over analyze, and most importantly, to
rationalize your failures. A failure is a failure regardless of the conditions that led to
it.

14. Don’t go against the markets, unless you have enough

patience and financial resilience to stick to a long term
plan.
In general, a beginner is never advised to trade against trends, or to pick tops and
bottoms by betting against the main forces of market momentum. Join the trends so
that your mind can relax. Fight the trends, and constant stress and fear will wreck
your career.

15. Understand that forex is about probabilities.

Forex is all about risk analysis and probability. There is no single method or style that
will generate profits all the time. The key to success is positioning ourselves in such a
way that the losses are harmless, while the profits are multiplied. Such a positioning
is only possible by managing our risk allocations in accordance with an
understanding of probability and risk management.

16. Be humble and patient. Do not fight the markets.

Recognize your failures, and try to accommodate them if they can’t be eliminated
completely. Above all, resist the illusion that you somehow possess the alchemist’s
stone of trading. Such an attitude will surely be ruinous on your career eventually.

17. Share your experiences. Follow your own judgment.

While it is a great idea to discuss your opinion on the markets with others, you
should be the one making the decisions. Consider the opinions of others, but make
your own choices. It is your money after all.

18. Study money management.

Once we make profits, it is time to protect them. Money management is about the
minimization of losses, and maximization of profits. To ensure that you don’t gamble
away your hard-earned profits, to “cut your losses short, and let profits ride”, you
should keep the bible of money management as the centerpiece of your trading
library at all times.

19. Study the markets, fundamentals, and technical factors

leading the price action.
That we have placed this so low in the list should not surprise the experienced trader.
Faulty analysis is rarely the cause of a wiped-out account. A career that fails to begin
is never killed by the consequences of erroneous application or understanding of
fundamental or technical studies. Other issues that are related to money
management, and emotional control are far more important than analysis for the
beginner, but as those issues are overcome, and steady gains are realized, the edge
gained by successful analysis of the markets will be invaluable. Analysis is important,
but only after a proper attitude to trading and risk taking is attained.

20. Don’t give up.

Finally, provided that you risk only what you can afford to lose, persistence, and a
determination to succeed are great advantages. It is highly unlikely that you will
become a trading genius overnight, so it is only sensible to await the ripening of your
skills, and the development of your talents before giving up. As long as the learning
process is painless, as long as the amounts that you risk do not derail your plans
about the future and your life in general, the pains of the learning process will be
harmless.

Are you ready to trade?