10 Essential Forex Trading Tips For Trading Forex Successfully

There are a number of things that the top Forex traders in the world do in order to trade Forex successfully. Becoming a profitable Forex trader does not happen by accident. Quite surprisingly profitable Forex trading does not need to be difficult if you follow some simple guidelines.

What follows will be a list of those things which must be done. Some must be done before you begin to trade Forex and some must be done after you begin to trade Forex.

Decide Why You Want To Trade Forex — It is important to understand why you want to trade Forex in the first place.  You might say that quite obviously everyone wants to trade Forex in order to make money.  You would not be wrong in that statement, but different people will have different reasons in addition to making money.  Some of these reasons may include quitting your day job and trading Forex full time or earning a good living while traveling the world.

All the above are valid reasons as long as they are kept in perspective.  For instance, it would be unrealistic to expect to earn a full-time living trading Forex after your first week of trading.

Have Realistic Expectations — This is one of the most important things that you can do in order to trade Forex successfully.  It’s easy for any of us to find products with exaggerated claims of making unbelievable amounts of money after only trading for a short period of time.  Many beginning traders fall into the trap of thinking that these exaggerated, atypical earnings claims are the norm in Forex trading.  As a result of this many beginning traders abandon perfectly good Forex trading strategies because they may compare the returns with unrealistic returns they see elsewhere.

Have realistic expectations of your Forex trading and realize that much like Rome your Forex trading fortune will not be built in one day.

Have Adequate Working Capital — It is very inexpensive to open an account and begin to trade Forex.  There are micro accounts available that can be opened for a minimum of $25.  Forex mini accounts start at around a $400 minimum deposit level.

It makes perfect sense to open up a smaller account when you are honing your ideas and trading strategies. If your plan is to trade for a living then quite obviously starting off with a $25 account isn’t going to cut it.  There are a number of factors you’ll need to consider in order to determine how much is necessary to fund your account.  Here are a few things which must be considered:

Know Your Trading Profit Goals — If you’re planning on generating $100,000 in Forex trading profits and your trading method can generate 100% return annually then you will need $100,000 in initial working capital.

Know Your Maximum Drawdown — Your Forex trading strategy’s maximum drawdown must be factored in.  Your maximum drawdown is the largest peak-to-valley dip in equity that your trading system has historically experienced.  Here’s a quick example:

If your trading strategy has a maximum historical drawdown of $25,000 you should not open a Forex trading account with only $25,000.  The reason for this is that this leaves you absolutely no breathing room.  If and when your $25,000 trading account experiences this level of drawdown you will no longer be able to trade.  This means that you will not be able to take advantage of any trading opportunities after your drawdown level is reached.

Have A Solid Forex Trading Plan  — Every successful business creates a business plan before they open their doors for business. There is no reason that Forex trading should be any different. Planning is important in Forex trading because planning helps you to keep on track and minimize uncertainty. Your trading plan doesn’t have to be complex for you to trade Forex effectively.

Have A Good Forex Trading System/Forex Strategy  — This may seem obvious, but you would be surprised how many people trade Forex on a whim. There may be a few gifted traders who have an uncanny knack for choosing the right market direction. For the rest of us who wish to trade successfully it’s important that we use a good trading system already proven to yield positive results.

Test Your Trading System On A demo Account/Micro Account — Try hard to resist the sometimes overwhelming temptation to jump in and start trading with a large amount of real money. Practice and perfect your skills first using a Forex demo account. Your demo account will be your “acid test”. If you can’t make your demo account grow then it is unlikely that the trading methods you are using will make you money in a real-money account.

It is recommended that you use a demo account to refine each new Forex trading strategy that you use. Remember, in Forex trading practice really does make perfect.

Learn Forex Trading — It may not be the most prudent thing to do to simply buy a Forex robot and let it start to trade for you. In the long run you will be a much more successful trader by learning to trade Forex yourself. Get your Forex education started by reading Forex books, taking a few Forex courses, and practicing what you’ve learned on a Forex demo account.

Trade Only With Risk Capital — Risk capital is also referred to as “money you can afford to lose”. This is money specifically set aside for speculation in the Forex market.  Another way to look at this is that if you were to lose all the money in your Forex account that it will not affect your lifestyle in any way.

Trading with money that you cannot afford to lose is also referred to as trading with “scared money”.  Scared money is money that you are afraid to lose and will agonize over even to the point of having sleepless nights.

If you can not afford to lose money in your Forex trading account you are treading on dangerous ground. Keep in mind that even a great Forex trading strategy may not deliver the exact profit that you need at the exact time that you need it. 

Never Add To A Losing Trade — This is an easy trap to fall into. None of us is thrilled about taking a loss on a trade. We have to realize that losing trades are a natural part of Forex trading and every single one of the most successful Forex traders in the world has had losing trades.

New traders will often add another position to an already losing trade in order to “get a better average price”. They believe that they will at least be able to break even when it goes in their desired direction. Unfortunately what often happens is that the market moves further and further against them. Now what was once a small manageable loss has become a large catastrophic loss.

The moral of the story here is simple. To trade Forex profitably never add to a losing trade.

Control Your Risk — By controlling your risk you control your reward. Never trade a system if you don’t know your risk level. Never enter a trade without setting a definite level to exit the trade if the market moves against you.

Risk control will allow you to “stay in the game” by preserving capital by not allowing for needless, out-of-control losses. Let’s look at an example.

If we have a $5,000 Forex account and decide to risk $2,500 on each trade how many times can we lose? It doesn’t take a rocket scientist to see that the above example was one of poor risk control.

Have Proper Trading Discipline — A lot has been written about Forex trading psychology and trading discipline.  Successful Forex traders know that it is absolutely crucial to trade in a disciplined fashion.  Without trading discipline and the mindset to maintain your discipline all Forex trading tools will be useless to you. Discipline helps you to stay focused and stick to your trading system. Sticking with a good trading system helps you to profit and eventually create wealth. By keeping your emotions in check you will be able to trade forex without guesswork, anxiety, or frustration.

We’ve covered some of the basic things you must do to trade Forex successfully. Each of these are important trading rules which continue to withstand the test of time. Refer to this list from time to time and apply the rules to your own trading. You will find that they will help keep you on the right path to successful Forex trading.

What Is A Forex Mini Account And How It Can Help Your Forex Trading?

A Forex mini account is a smaller version of the standard Forex account. A standard Forex account requires approximately $2000 as the minimum opening requirement.  A mini account can be opened with as little as $400.

Mini accounts trade what are known as “mini lots”.  The pip value for a standard Forex account is $10, so if the market moves 100 pips in your favor your profit would be $1000.  Your pip value for a mini account, however, is $1  and if the market moves 100 pips in your favor your profit would be $100.

If you’d like to open up an account with even less money than a mini account there is also a “micro account”. A micro account can be opened for as little as $25. if the market moves 100 pips in your favor in this type of account your profit would be $10.

The smaller Forex accounts such as the Forex mini account are extremely handy for those getting started in Forex trading.  Although there are demo accounts available which require no real money to trade, a mini account can serve a unique purpose.  That purpose is that you will be trading with real money.  Trading with real money will help your trading more closely match what it will be like when you move up to trading a standard account.

You see, with a Forex demo account you really have nothing at risk. Truthfully, people will tend to “play” with “play money”. This is the reason so many beginning Forex traders do amazing things in there Forex demo account, but often do terribly when they start trading with real money in a standard account.

Your objective while trading your Forex mini account is to closely simulate what you will do when you step up to a standard account. You will have an opportunity to put your trading systems to the test while at the same time having a smaller amount of money on the table.

Make certain that you treat your mini account with the same level of respect and risk control that you will use with your standard Forex account. This will help you develop the necessary level of discipline to trade Forex successfully. When you are successfully able to trade your Forex mini account you can then step into a standard account with confidence.

What Are Forex Signals?

Forex trading signals are used by all Forex traders whether they are discretionary or use fundamental or technical analysis. Trading signals tell the Forex trader one of three things, when to get in, when to get out, and when to stand aside.

This signal is also called an alert as it “alerts” the trader to take some needed action. Trading signals may come in a number of forms:

Audio — With an audio alert your computer will make a sound to let you know there is a trading signal available and that you must take action or prepare to take action.

Visual — When using a visual alert a pop-up window may appear on your screen giving you instructions for placing your trade.

Email alert or text message — Some Forex trading software can send you an email or even a text message to your cell phone letting you know when a Forex signal has been triggered. Email is also used to send signals to you if you are the client of a commercially available Forex signals service.

Web based — This is another method by which you may get alerts if you are a client of a commercially available Forex signals service.  Your service provider might require that you log into their site at certain times during the day in order to check the available signals.

If you are searching for Forex trading signals to use in your personal trading make certain that they fit both your personality as well as your schedule.  For those too busy to sit in front of the screen all day a longer-term Forex signal may benefit them.

There is specialized Forex software for creating trading signals. The software will allow you to back test your ideas to see how well your signals would have performed on past Forex data. Creating your own signals can be very rewarding and exciting. It does take a level of skill and may require that you have more experience in trading before you attempt this. While anyone can create a system to generate Forex signals, not everyone can create a trading system that works.

If you’re not interested in creating your own trading signals you have a number of choices. You can either subscribe to a Forex signal service and pay a monthly fee. You can also buy one of the many available Forex robots.  Forex robots interface with your Forex broker’s platform to not only generate signals but also to automatically place trades if you wish.