8 Forex Trading Tips to Become a Better Forex Trader Right Now

8 Forex Trading Tips to Become a Better Forex Trader Right Now
8 Forex Trading Tips to Become a Better Forex Trader Right Now

Whether you are new to the forex trading or you are trading for while and still not discovered the path of profitability then I can assure that these 8 forex trading tips will surely change your current trading status.

Forex trading can be a hard endeavor for rookie forex traders especially when they don’t know the rules yet. Most of these traders want to get rich overnight, no matter how unrealistic it may seem. So in this article, we have compelled a list of 8 forex trading tips for beginner traders to help to dominated their trading in 2020. If you already have expertise with forex trading, It’s always great to memorize the fundamentals.

1. Find a Good Trading Strategy & Stick to It

The big problem for many amateur traders who get into the world of forex trading is that they are always on the lookout for the Holy Grail trading strategy that will be going to change their lives.

In one week, most of these new traders are going to trade with one particular trading strategy they found on google or created by themselves.

But after losing five trades in a row, they are going to throw their trading strategy out of the window and jump into another holy grail trading system, which promised huge returns over a short time.

But on the other hand, successful forex traders stuck to one trading strategy and focused on improving that strategy over time.

They know estimating a trading strategy with low numbers of trades is not statistically significant. Instead, aim to record 50-100 trades in your trade journal before deciding on your trading strategy.

The forex market is always changing mean that there will be times when your strategy performs exceptionally well, and there will be times the results of your trading strategy are not so good. This incident is common among successful traders who know how to adapt as the market conditions change.

When taking all these points into account, it should be clear that there is no way to develop a profitable trading strategy if you regularly change it.

Find a trading strategy that suits your personality and your day to day life. Then instead of changing the trading strategy regularly, test it on a demo trading account. While you are testing, make sure to implement new trading techniques that help to increase the profitability of your trading strategy.

2. Develop a Solid Trade Plan That Works for You

“A Trading Plan is Just Words Until You Act On It”

In forex trading, having a well-outlined trading plan is essential. Without it is difficult to achieve consistent profits over time.

On the other hand, When you face unexpected circumstances, the trading plan will help to keep everything under control and, It also shows you how to react when uncertainty hit you.

The forex trade plan is a broad set of rules comprising every perspective of the life of a forex trader, not only the entry and exit method of strategy but also aspects of risk and money management which help traders to reduce losses while maximizing gains.

But is that all?

No. A good trade plan will also help to keep traders physical, emotional, and mental states under control when the market move against them or a trader is suffering from a drawdown.

In fact, the trade plan has to cover all areas and has to be well planned so that you will not be found unprepared.

“Success Occurs When Opportunity Meets Preparation”

You always have to follow your trade plan regardless of the situation. That is the only way of doing trading seriously.

Finally, it is not enough to have a trading plan, but a trader, following that well-prepared trading plan is the one who can consistently extract profit from the forex market.

So,

Plan the Trade, Trade the Plan.

3. Have a Proper Risk Management Plan

Capital Preservation is the most vital factor if you want to survive in the game of forex trading for a long time.

There are traders who want to reduce the size of a potential loss trades, but on the other hand, there are traders who want to get more out of a single trade.

Here is the fact, In order to gain the highest returns, you need to take greater risks.

But a trader with proper risk management techniques can keep his losses minimize while maximizing the gains.

This is where proper risk management comes in to play.

Risk management is a combination of techniques giving downsize protection to traders. This can include limiting your position size, trading only during certain hours or days, stay away from the forex market when major news announcements are set on and recognizing when to cut the losses.

Unfortunately, many beginner forex traders fail to implement proper risk management techniques to their trading plan. Mainly because these amateur traders enjoy pursing huge returns by making risky investments and they totally forget about capital preservation is far more important than anything.

As a forex trader knowing when to take losses on trades is a crucial skill to master and is a powerful risk control method as well.

This can be done through the help of several risk management methods.

  1. Never risk more than 2% percent per trade.
  2. Use Correct Lot size for every trades you take.
  3. Keep your total risk exposure below 10%.
  4. Have a mental stop loss.
  5. Never widen your stop loss.

4. Say Bye to All the Trade Signal Services

A forex signal service is a suggestion for executing a trade at a specific price and time. These signals are generated by analysts from signal service providers.

A lot of traders look for signal service providers after a string of losses or after months of trading failures. Let me ask a question.

Do you take responsibility for your own if you lose a trade provided by signal providers?

This is the main problem with trading signals. Once a forex trader starts to blindly follow someone else’s signal they are not ready taking responsibility for their actions.

But on the other hand, Successful traders know why they execute the trade and when to exit or cut the losses and if the trade goes against them they take full responsibility and move on to the next trade.

Also, a trade signal is not a trade. It is true that trade signal providers provide trades with entry and exit prices.

But where is the risk management, money management, emotional management and when to cut losses and take profits?

And another question. What is the process behind the trade that the signal provider give you?

If you don’t know the process behind the trade provided by the signal provider its impossible to consistently extract the profit from the forex market over time. Simply because you don’t know why and when they are placing trades.

Finally, your trading career is controlled by the signal provider. If the signal provider stops trade for days or weeks, what are you going to do?

Are you waiting for them? That is BS.

Instead, try to find a trading strategy that matches your day to day life schedule and your personality. Most importantly stick to your trade strategy rather than stuck on someone else trade signals.

5. Have a Sound Money Management Plan

Most of the beginner traders obsessed with market direction, entry techniques and returns. But on the other hand, Professional traders are focused on the money management plan.

In the world of forex trading, money management is the most overlook factor, especially among amateur traders.

Only a handful of trader knows the fact that money management is a huge deal if you want to have smoothed rising equity curve like equity chart below.

forex equity curve

A proper Money management technique can make an average trading strategy into a killer trading strategy that provides consistent growth of any trading account year after year.

Also even if you had the worst drawdown, a proper money management plan can reduce the damage that happened due to drawdown and help traders to dig out from the drawdown quickly.

Even if you had the best trading strategy on the planet without a proper money management plan it is going to provide average results that most new traders are getting.

So the point here is to find a proper money management plan which helps to minimize the drawdown while increasing the growth rate of your trading account.

6. Focus on Price Action, Not the Indicators

Be conscious that price action is the king when it comes to quality and simplicity.

Also, the price action is the leading indicator of everything else. If you use any other indicator such as stochastic, EMAs and RSI remember that they all follow the price action and not the other way around.

But unfortunatly, Lot of novice forex traders go for the complex trading strategies or systems with the belief of complexity is going to rock in the market and they ended up not having the results they expected.

But successful forex traders know that simplicity is far more effective than complexity especially when it comes to trading the forex market and Almost every successful traders who consistent in the forex market is used at least some sort price action techniques to enhance their trading result.

The point here is, you should prioritize the price action. Why?

Because the price action reflects the behaviors of other market participants (Bank, Hedge fund and retail traders) and it also filtered out whipsaw price movement in lower timeframes and enable you to make crystal clear trade decision that is objective and profitable.

Related: Price action trading.

7. Be Patience. Trading Takes Time.

Real Trading is boring, and it’s not “So easy a caveman can do it”. Don’t listen to the craps like that.

Trading is a professional full of people ready to take your money that is more prepared than you are.

“The Stock Market is a device for transferring money from the impatience to the patient.” – warren buffet

In trading career, a variety of factors can influence a trader’s performance like drawdowns, losing streaks and not having trades for a few days, when you face times like this, managing your calmness is essential for trading success.

Understand how important patience is especially in the early stage of the trader career will completely change the trajectory of your trading performance and help you to achieve your trading goals faster.

Also, you need to understand that there is no quick way to make money from trading forex. Learning how to trade requires a lot of hard work, discipline, dedication and above all a rock-solid patience.

8. Cut your Loses Early and Let Your Profit Run

“Cut your losses short and let the profit run” is one of the best inspirational quotes I heard in the early stage of my trading career.

This saying has a very noble history and can be applied to almost every industry in the world whether it is trading or any other business.

When it comes to forex trading, traders who stay true to this saying, generally end up maintaining low drawdown in their trading account while accumulating bigger winners which resulted in smoothed rising equity curve.

The basic idea behind this particular maxim is to assist forex traders to get out of losing position soon, but have the patience to stay in the winning trades and stopping the tendency to close the winning position too early.

Assume a trader with a sound trading strategy that has edge over the market and following this rule will help that trader to accumulate the returns over time.

Now it is your turn,

Whatever strategy you use, whether it is profitable or not, try to “cut your losses early” and “let your profit run” and I can assure you that sooner you will see a dramatic difference in your trading performance.

The forex trading tips above will lead you to a structured way of trading and should assist you to become a more polished and organized trader.

Trading is an art but totally different kind of art, in trading success does not depend on how smart you are it depends on how you stay patient and stay disciplined in front of uncertainty.

I hope these forex trading tips and tricks will help you prepare for the world’s biggest financial market at least as a first step.

If I missed a trading tip or you have any question feel free to comment in the comment section below.

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