Tip 1. Develop a trading strategy or adopt an existing one and make sure it works on historical FOREX data. Then make sure it works on a demo account, and finally make sure it works on your life account with mini-lots. Then you can trade using regular FOREX lot sizes. Trading without a proven strategy cannot be profitable over a long period of time.
Tip 2. When you trade, always consider the current trend. Depending on the timeframe you trade in, it can be daily, monthly or global trend. It can also be flat, especially during the summer months. If the market is in a trend, open positions in the direction of the trend only. If it is flat, you can trade in both directions within the channel.
Tip 3. Before opening your position, take into consideration the larger timeframe. Check all the important levels, previous extremums and the direction the market is moving towards on the global scale. Very often volatility is extremely high at important levels, where certainty is low. If you trade intraday, check the daily timeframe to make sure you do not trade against the monthly trend.
Tip 4. Use a smaller timeframe to find the best entry and exit points. If you trade on H1 charts, use M15 charts to find the best entry and exit points. If you trade on daily charts, use H1 charts to find best entry and exit points.
Tip 5. Learn how to manage your risks. Your deposit is your workhorse, and if you lose it, you are out of business. This is the reason why you should not risk more than 5% of your deposit per trade under any circumstances. In my FOREX tips, I recommend to risk even less. 2-3% is the safest way to go.
Tip 6. Learn to control your emotions. Watch for fear and greed and follow your trading system no matter what. When you start opening and closing positions based on what you feel and not based on what your system tells you, you start to lose your money. The more money you lose, the more chaotic your trading becomes and the more money you lose as a result. The same happens if you win too many trades in a single row. You start feeling yourself like a “God”, lose your mind, and start ignoring your system, which usually leads to big losses. Always stay calm no matter whether you win or lose. It’s ok to lose a single trade or a number of trades in a row. After losing trades you usually get winning trades, which compensate your losses, and the opposite is also true.
Tip 7. Your trading strategy must complement your lifestyle and personality. If you can trade only a few hours a day, choose a strategy that is based on delayed orders, and use larger timeframes such as daily and monthly timeframes. If you cannot wait for big market movements, use a smaller timeframe, such as M5 or M15. Perhaps, a scalping strategy will best suit you. If you need hours or days to make a decision, use larger timeframes and trade long-term.
Tip 8. If you are in doubt, or when the markets are uncertain, refrain from trading. Staying away and not trading is also a position, often called “neutral position”. By not trading you avoid losses, and prepare to take a big win when uncertainty is over and a new trend emerges.
Tip 9. Limit your losses by using protective stop-loss orders or hedging. If you open a position in a wrong direction, stop-loss or hedging order will kick in saving your deposit. You will lose this single trade, and your deposit will shrink a bit which is fine. But if you don’t use preventive stop-losses, your stop-loss in your entire deposit. Are you sure you want to risk your workhorse for the sake of a single transaction?
Tip 10. Before accepting a trade signal, check if Profit/Loss ratio of the trade is at least 2:1. When you forecast a price movement, you forecast profit and loss targets. Divide projected profit in pips by projected loss in pips, and you will get this ratio. Do not enter the market if you come up with a number less than 2. History has proven the fact that traders cannot forecast price movements with greater probability than 60%. This is the reason why choosing P/L ration of at least 2:1 is the only way to stay profitable over the long term.
Tip 11. Never add positions to a losing trade. If you think that market is about to turn around and desperately want to add positions to your losing trade at a “better price”, it means you are trading on emotions. Market will not turn around and you will lose more money than you have originally planned. Some people even remove stop-loss orders if market starts to move against an open position to “prevent” losses, and increase this position at a “better price” at the same time. Guess what happens to these people in a little while? In my FOREX tips I recommend you to add positions to a trade ONLY if it is a winning trade, and ONLY if you know that the market still has some momentum and will probably reach your target.
Tip 12. Cut your losses and allow your profits to grow. Close losing positions without a hesitation and let winning positions to accumulate more profit. Do not be afraid that the market will turn around and you will lose those 20 pips you’ve made for a couple of hours. Set stop-loss order to zero, and allow the profit to grow. Once you get a good profit, you can protect it by moving your stop-loss order higher to let’s say +80 pips to allow more profits to be generated.
Tip 13. Know active market hours for the currency pairs you are trading. The greatest movements happen with GBPUSD and EURUSD when London and New York sessions overlap (between 8:00am and 11:00am EST). The same happens with AUDJPY pair when Sydney and Tokyo sessions overlap (between 7:00pm and 12:00am EST). It’s easier and safer to initiate a trade when market takes of, and quickly moves towards your target, than to sit for hours near terminal waiting for the price to move some 20 pips.
Tip 14. Trading day of week matters. You do not want to be on the market when the trading volume is extremely low, or when the majority of traders close their positions. This is the reason why you should avoid Mondays and Fridays. Mondays tend to be flatty and shaky, and Fridays way too volatile because on Fridays many traders close their weekly positions.
Tip 15. Avoid highly leveraged FOREX accounts unless you know what you are doing. The more your account is leveraged, the greater your risk is, and the more careful you should be as a result. For a novice trader any account with leverage more than 100:1 can be disastrous. Leverage stands for multiplication. 100:1 means that for every dollar you have on your account, you can trade $100 dollars. But if you open a position and market moves against you, you loose your money 100x times faster than without a leverage.
Tip 16. Evaluate your trading skills by the end of a month or year. Do not judge about your trading success or failure on a single trade. You need to prove yourself over a long period of time. Do not think about the end result every time you close your positions. Make a number of trades, then analyze the end result. A winning strategy may give you 10 loosing trades in a row with -15 pips loss, and one successful trade with +300 pips profit per month, and over the period of a year this strategy can yield +2000 pips net profit. But if you judge it within the bad days, you may give up too early.
Tip 17. No one is born a successful trader. People become successful traders by learning how to stay successful over a long period of time. You may need a couple of burned deposits until you get it right. This is the reason why your first live account should be a FOREX mini account not greater than $1,000 USD. Once your prove you can stay profitable for a long period of time, you can deposit more and start using regular lot sizes.
Tip 2. When you trade, always consider the current trend. Depending on the timeframe you trade in, it can be daily, monthly or global trend. It can also be flat, especially during the summer months. If the market is in a trend, open positions in the direction of the trend only. If it is flat, you can trade in both directions within the channel.
Tip 3. Before opening your position, take into consideration the larger timeframe. Check all the important levels, previous extremums and the direction the market is moving towards on the global scale. Very often volatility is extremely high at important levels, where certainty is low. If you trade intraday, check the daily timeframe to make sure you do not trade against the monthly trend.
Tip 4. Use a smaller timeframe to find the best entry and exit points. If you trade on H1 charts, use M15 charts to find the best entry and exit points. If you trade on daily charts, use H1 charts to find best entry and exit points.
Tip 5. Learn how to manage your risks. Your deposit is your workhorse, and if you lose it, you are out of business. This is the reason why you should not risk more than 5% of your deposit per trade under any circumstances. In my FOREX tips, I recommend to risk even less. 2-3% is the safest way to go.
Tip 6. Learn to control your emotions. Watch for fear and greed and follow your trading system no matter what. When you start opening and closing positions based on what you feel and not based on what your system tells you, you start to lose your money. The more money you lose, the more chaotic your trading becomes and the more money you lose as a result. The same happens if you win too many trades in a single row. You start feeling yourself like a “God”, lose your mind, and start ignoring your system, which usually leads to big losses. Always stay calm no matter whether you win or lose. It’s ok to lose a single trade or a number of trades in a row. After losing trades you usually get winning trades, which compensate your losses, and the opposite is also true.
Tip 7. Your trading strategy must complement your lifestyle and personality. If you can trade only a few hours a day, choose a strategy that is based on delayed orders, and use larger timeframes such as daily and monthly timeframes. If you cannot wait for big market movements, use a smaller timeframe, such as M5 or M15. Perhaps, a scalping strategy will best suit you. If you need hours or days to make a decision, use larger timeframes and trade long-term.
Tip 8. If you are in doubt, or when the markets are uncertain, refrain from trading. Staying away and not trading is also a position, often called “neutral position”. By not trading you avoid losses, and prepare to take a big win when uncertainty is over and a new trend emerges.
Tip 9. Limit your losses by using protective stop-loss orders or hedging. If you open a position in a wrong direction, stop-loss or hedging order will kick in saving your deposit. You will lose this single trade, and your deposit will shrink a bit which is fine. But if you don’t use preventive stop-losses, your stop-loss in your entire deposit. Are you sure you want to risk your workhorse for the sake of a single transaction?
Tip 10. Before accepting a trade signal, check if Profit/Loss ratio of the trade is at least 2:1. When you forecast a price movement, you forecast profit and loss targets. Divide projected profit in pips by projected loss in pips, and you will get this ratio. Do not enter the market if you come up with a number less than 2. History has proven the fact that traders cannot forecast price movements with greater probability than 60%. This is the reason why choosing P/L ration of at least 2:1 is the only way to stay profitable over the long term.
Tip 11. Never add positions to a losing trade. If you think that market is about to turn around and desperately want to add positions to your losing trade at a “better price”, it means you are trading on emotions. Market will not turn around and you will lose more money than you have originally planned. Some people even remove stop-loss orders if market starts to move against an open position to “prevent” losses, and increase this position at a “better price” at the same time. Guess what happens to these people in a little while? In my FOREX tips I recommend you to add positions to a trade ONLY if it is a winning trade, and ONLY if you know that the market still has some momentum and will probably reach your target.
Tip 12. Cut your losses and allow your profits to grow. Close losing positions without a hesitation and let winning positions to accumulate more profit. Do not be afraid that the market will turn around and you will lose those 20 pips you’ve made for a couple of hours. Set stop-loss order to zero, and allow the profit to grow. Once you get a good profit, you can protect it by moving your stop-loss order higher to let’s say +80 pips to allow more profits to be generated.
Tip 13. Know active market hours for the currency pairs you are trading. The greatest movements happen with GBPUSD and EURUSD when London and New York sessions overlap (between 8:00am and 11:00am EST). The same happens with AUDJPY pair when Sydney and Tokyo sessions overlap (between 7:00pm and 12:00am EST). It’s easier and safer to initiate a trade when market takes of, and quickly moves towards your target, than to sit for hours near terminal waiting for the price to move some 20 pips.
Tip 14. Trading day of week matters. You do not want to be on the market when the trading volume is extremely low, or when the majority of traders close their positions. This is the reason why you should avoid Mondays and Fridays. Mondays tend to be flatty and shaky, and Fridays way too volatile because on Fridays many traders close their weekly positions.
Tip 15. Avoid highly leveraged FOREX accounts unless you know what you are doing. The more your account is leveraged, the greater your risk is, and the more careful you should be as a result. For a novice trader any account with leverage more than 100:1 can be disastrous. Leverage stands for multiplication. 100:1 means that for every dollar you have on your account, you can trade $100 dollars. But if you open a position and market moves against you, you loose your money 100x times faster than without a leverage.
Tip 16. Evaluate your trading skills by the end of a month or year. Do not judge about your trading success or failure on a single trade. You need to prove yourself over a long period of time. Do not think about the end result every time you close your positions. Make a number of trades, then analyze the end result. A winning strategy may give you 10 loosing trades in a row with -15 pips loss, and one successful trade with +300 pips profit per month, and over the period of a year this strategy can yield +2000 pips net profit. But if you judge it within the bad days, you may give up too early.
Tip 17. No one is born a successful trader. People become successful traders by learning how to stay successful over a long period of time. You may need a couple of burned deposits until you get it right. This is the reason why your first live account should be a FOREX mini account not greater than $1,000 USD. Once your prove you can stay profitable for a long period of time, you can deposit more and start using regular lot sizes.
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