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) I asked Jason Gospodarek from FastPips.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!
Jason Gospodarek, OD
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Hello Forex,
Technical and fundamental analysis are the two main ways of preparing yourself before placing a trade. Technical setups are based simply on charting patterns, price action, indicator, oscillators, etc; while fundamental analysis is based strictly on news and events for a given country/currency. Some traders use one of these, some use both. Like most things in life, I feel that a good mix is key. Most traders I know personally are very into their technical setups on the charts, and pay little attention to fundamentals. I always do a bit of both. Just for the record, I would state my trading is 70% technical and 30% fundamental overall. To answer your question, as both of these strategies are basically how the entire markets move, I would say they are very accurate. In my post above, I describe how longer time frame charts, and the setups on them, are more important that similar shorter term setups. For example, a trendline a daily chart holds more power than a trendline on a 1 minute chart. My biggest tip would be to always be aware of news events and when they are scheduled as they often really shake up the markets. Watching other world equity markets such as the Dow, Hang Seng, and others, can often give a good idea of overall sentiment as well.
Happy trading!
Jason
I have a question, how reliable are technical and fundamental analyses really?
Thanks a lot for your information.
Hello Jason,
My experience has been just what you mention above to Ruth Osburn. Is there no such thing as progressive OR % stop loss applied right from the start?
#8 The mentor or companion is difficult to find who will trade with you or be coached and those that offer such service are mostly self serving, their teaching methods often cock-eyed - ill logical. What happened to black board logic? Did it go out with the bath water called marketing ?? The webinars mostly a waste of time ...
#10 is cinfusing.
Bill N.
Thanks for your good info, I m new to forex.
Request you give me more info/recommendation please like:
1. good broker with low spread
2. right margin to use
3. swing trading method
4. best time frame to use for swing trading(1hr, 2hr, 4hr, daily)
5. useful indicator for swing trading forex
6. min capital needed
Regards
Joseph
Hello Joseph,
Glad to have you on board! As I mentioned in a previous post, I don't want to recommend brokers here as to avoid bias. You are of course always welcome to contact me personally though my FastPips.com website if you would like. Regarding time frames for swing trading, I personally only care to go as long as the 1 hour charts. Just to be clear, most of what I do is scalping on the 1 and 5 minute charts, but for my moderate length trades I use the 15 minute and 1 hour. Trading longer term time frames can often to lead to more profitable trades and of course lower commissions/spreads since you would not be trading as often, but I prefer the shorter term strategy personally. I use several different indicators for my trading, depending on the time frames, pairs, and overall goal of the system being used. Some of my personal favorites are support/resistance lines, fib levels, macd, stochastics, and a few others. Minimum capital required is really up to you, many brokerages allow opening accounts for as little as $100 USD to $300 USD, but they often tie this is extreme leverage which can quickly become disastrous for one's account. I personally recommend starting with at least $1,000 USD or a little more after practicing with a demo account.
Best wishes for your trading success!
Jason
If you´re new to FX, be prepared to lose your money.
Hello Ruth,
Thanks for the question... unfortunately there is no easy answer here. There are so many variables involved with setting stops while trading that it is tough to make a quick reply. One thing I personally like to do is to place 2-3 small orders in place of one larger order. This allows me to set variable take profit levels, possibly set one trailing stop, and use different points of signal confluence overall. As more and more traders set stops above or below local swing highs/lows, I find that using that basic strategy is becoming less effective than even a few years ago. I'm sure many of us have been in profit on a trade, set the stop below a swing low and it gets hit for a loss, only to reverse almost immediately to move on to new highs. Once again, there are just too many variables for any given trade, but I have found using multiple orders gives me more options and puts my mind at ease when I have to leave trades run unattended for any length of time.
Best wishes and happy trading!
Jason
Please explain #2 a litle further. I have lost more money & opportunities using stop-loss. How low should you go? I have gone $2.00 - $4.00, only to have the market come back a day or so later & I have lost. Would appreciate your response. Thanks
Hi Jason,
On point 7 above, when you talk about using a forex broker that offers you a narrow spread I was wondering do you mean a broker that offers you access to forex through the futures market or one that quotes you for the cash market. Do you have any preferences for choosing one over the other or do you treat them as equals ?
Thanks
Hi there Mark,
Thanks for the message. My point #7 above is in reference to forex brokers who give you access to the cash / spot forex market and earn their fees through the bid/ask spread. For larger accounts, many of these brokers will charge a flat commission to trade and narrow the spread paid significantly, but one must usually have an account in the $50,000 USD range or more. For most traders with smaller amounts of capital, researching to find the lowest spread often saves money when trading, but can sometimes be a sign of a broker that is lacking in other areas, such as poor support, delayed withdrawals, etc. I do have several brokers I prefer, but will skip posting here to avoid bias in this blog. Most of the large US based brokers (and several of the large overseas companies) are safe and well equipped to handle most traders and keep them happy as well.
Best wishes and happy trading!
Jason