The Forex Trading Tips
Foreign exchange is the most competitive financial market in the world. Here are some key tips for trading Forex currencies. Always remember that confidence and skill are developed through experience—they cannot be bought.
Forex Trading Tip: Trade like a Big Shark not like a Little Penguin
There’s a little-known secret that every wealthy investor understands—it's called Great-Reward Investing. Most Forex traders open positions with a reward-to-risk (R/R) ratio of 1:1 to 2:1; they trade like cautious penguins. With a 1:1 R/R ratio, you need at least a 60% win rate just to break even after transaction costs. In contrast, seasoned professionals—“the sharks”—seek trades with R/R ratios of 5:1 or higher. With a 5:1 R/R, you can lose three out of four trades and still turn a solid profit. That’s a game-changer.
To profit from Great-Reward Trades, you need to:
(a) Use conservative leverage—no more than 10:1 (or less)
(b) Follow long-term trends, typically visible on H4 and D1 charts
Here’s how to apply this strategy:
■ Identify a strong trending market visible on the H4 or D1 charts.
■ Confirm the trend continuation using the MACD histogram and chart patterns such as double tops and bottoms, pennants, flags, and ascending or descending triangles.
■ Time your entry using the M5 or M15 charts and confirm it with the RSI(21).
■ Let your profits run.
Forex Trading Tip: Trade only When the Time is Right
As a legendary trader once said: good investing is boring—if you're having fun, you're probably not making money. Trading is not a hobby, and it's not something you can do whenever you feel like it—unless you're prepared to lose money. If you don’t see any solid trading opportunities, shut down your computer and spend time with your family and friends. Timing is everything in life, and trading is no exception.
If you are an intraday trader, prefer to open positions between 10:00 and 17:00 GMT, from Tuesday to Thursday, when market liquidity is at its peak. Higher liquidity means tighter spreads and better-trending currency pairs.
■ Learn more about Forex trading and timing at ForexExperts.net: » Best Times to Trade Forex (Hours, Days and Months)
Forex Trading Tip: Forex Trading as a Stepwise Process
Successful Forex trading cannot be learned overnight; it requires several months of training and practice. Beginners should start with a demo account to become familiar with MetaTrader-4 and test their strategies without risk. After gaining experience on a demo account, the next step is to open a micro-lot account. A micro account treats 1,000 USD as 1 lot, allowing you to limit the impact of mistakes. Next, traders should progress to a mini-lot account, and finally, to a standard lot account where 1 lot equals 100,000 USD. Confidence and skill are developed through experience—they cannot be bought.
■ Open a Risk-Free Demo Account: » Forex Brokers List
Forex Trading Tip: Limit Your Trading Cost
The cost of trading Forex is generally very low, measured in just a few pips. However, as leverage and trading frequency increase, even these small costs can add up significantly. Professional traders pay close attention to their trading costs above all else. Here are a few ways to reduce your trading expenses:
■ Choose your broker carefully and avoid market makers; ECN/STP brokers are typically cheaper by design.
■ Trade only liquid Forex pairs and avoid trading during low-activity periods. The most active hours are between 10:00 GMT and 17:00 GMT.
■ Join a Forex rebate plan to reduce your trading costs by up to 50%.
■ Discover Forex trading rebates at ForexExperts.net: » Forex Rebate Programs
Forex Trading Tip: Select to Trade Trending Pairs
Forex pairs either trend upward or downward, or they move within a range (oscillate). Trending means the price of an asset moves strongly in one direction. These trends can be identified using the H4 or D1 charts, as explained earlier. Trending markets offer significant advantages for Forex traders. Following a strong trend can provide exceptional reward-to-risk ratios, sometimes up to 15:1. When profits are growing quickly, you don’t need to close positions out of fear; instead, you can use a trailing stop—say, 50 pips—to protect your gains.
A ranging market trades within a defined range between key support and resistance levels. You can trade these ranges using pending orders, taking positions in the direction of the trend until price hits support or resistance. Keep in mind, trending markets are generally easier to trade.
Forex Trading Tip: Take Into Account Market Volatility and Avoid News Releases
Experienced currency traders understand how to manage Forex market volatility, but beginners must be very cautious. Beginners should always use low leverage and allow plenty of room for their stop-loss orders when trading volatile currency pairs. Timing is also crucial—trading during major news releases exposes you to highly unpredictable and choppy market conditions. Non-professional traders are better off avoiding trading for 20 minutes before and 20 minutes after news releases. If you do trade during these times, use your stop-loss orders as protection and keep your leverage low.
Forex Trading Tip: Take Into Account the Interest Rate Differences
When you open a position on a currency pair, you are exposed to two currencies: the one you buy and the one you sell. Forex currencies pay interest rates, and if the currency you buy has a higher interest rate than the one you sell, you receive an overnight interest payment called a positive swap. Conversely, if the currency you buy has a lower interest rate than the one you sell, you are charged an overnight fee known as a negative swap. On certain Forex pairs like NZDUSD and AUDJPY, this interest difference can accumulate into significant profits over time, a strategy known as carry trading. Also, note that on Wednesday at midnight, the swap value triples to cover the weekend.
■ Find brokers for carry trading at ForexExperts.net: » Carry Trading
■ Forex Trading Tips
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