20 forex trading tips for beginners

Do you want to know the leading forex trading tips? This article gives you 20 forex trading tips that are worth looking at and putting to use.

Learning to trade forex can be complicated for a beginner. Most people want overnight riches, however unrealistic that may be. Trading forex for a steady profit can feel a little beyond you if you have not got a firm grip on the basics of trading. You have to genuinely commit yourself to building a foundation of basic knowledge before you can go any deeper. Below is a list of 20 forex trading tips for beginners.

1. Choose your broker wisely

Choosing a broker is the first step and a very important one. Take the time to check reviews of the broker, and make sure the one you pick is trustworthy and suits the way you trade. Reputable brokers usually hold a license from a leading regulator such as Australia (ASIC), the United Kingdom (FCA) or Cyprus (CySEC); check the license number on the regulator’s own website and see which legal entity your account belongs to. Before you get involved, look into the legal rules on forex where you live, for example whether forex trading is legal in Vietnam.

2. Create a plan of your own

No trading tip can help you if you do not have an effective trading strategy. One of the most common mistakes among new traders is that they never draw up a trading plan of their own. A good plan covers: the market conditions that make you enter, and an exit plan covering both take profit and stop loss. On top of that you need a strategy for managing your money and your emotions while trading, tuned to suit you as closely as possible.

3. Learn step by step

As with any other kind of learning when you take on new knowledge, trading requires you to start with the basics and go carefully until you understand this playing field: start with a demo account, then a small account, following the maxim “slow and steady”.

4. Master your emotions

Do not let your emotions carry you too far. Mastering your emotions can be very hard at times, especially after you have been through a loss. But keeping a cool head is extremely important, because only while you hold on to your reason can you make the most disciplined and soundest decisions. Whenever you let emotion take charge, undisciplined trading and needless losing trades follow, which is why managing emotional risk matters a great deal as well.

5. Reduce stress

This may sound like a forex trading tip that is too obvious and too general, because in everyday life you all know that if you are stressed your work is unlikely to go smoothly. But when you trade in the forex market, stress probably arrives more heavily than ever. There is the pressure of facing decisions that can take away your hard-earned money, or of staying up at night to follow price movements in the market. Think how you would be at that moment. Full of energy, or stressed? Forex trading really can generate a great deal of pressure, and the best way to reduce it is to accept the risk: the risk of losing money, the risk of missing an opportunity. Risk is an inseparable part of the forex market, so accept it.

6. Practice makes perfect

This forex trading tip really is for beginners. You will genuinely find it hard to succeed at anything on the first attempt. Only constant practice at trading brings results. But presumably you do not want to lose money while you are still learning the basics? Luckily for you, most brokers let you open a demo account to study and practice trading.

7. Trading psychology is the key

Forex trading really is closely bound up with psychology. Asked about it, most professional traders answer that “psychology is the most important and the hardest thing to master in the forex market”. Psychology is tied to every single trade you make, so when you trade, ask yourself:

• Is this trading signal really part of your trading system?
• What is making you enter? Discipline, or greed taking over?

And there are many other questions of that kind that you need to ask yourself when you trade forex.

8. Without risk, there is no success

No forex trading tip can promise you that you will become a successful trader. When you decide to become a trader, you should accept the possibility of failure. You will not have 100% of your trades come out successful. Do not let advertisements that promise profits get into your head. Set realistic targets for your forex trading instead.

9. Forex trading tip - patience

Success is never instant. It is the result of patience with a consistent plan. Plenty of people want success in forex trading in a hurry. It does not exist, so do not give it your attention.

10. Keep your knowledge up to date

Every day you trade forex is a day you make a little progress. Look closely at the forex market and write down what you learn. You can analyze the news, the trends and the financial processes in this market. The most important thing for making progress and succeeding in this market is to learn, to practice and to carry on taking in new knowledge. Repeat that process regularly and you will genuinely come to understand this market.

Learning and practicing in this market takes a lot of time and effort, but it pays off over the long run. For beginners, making use of the free forex learning channels helps them build both knowledge and skills for trading in this market.

11. Take time out

A simple forex trading tip that works wonderfully is to take time to relax and get away from the market. When you always have a computer window and several streams of data open to analyze, it is easy to come under pressure, and that is not at all good for your trading results, because a lack of clear thinking can lead to a wrong decision. In that case it is best to rest and relax for a while. Give yourself a little time to reflect on what has happened.

12. The trend is good for you

An important forex trading tip is that you need to grasp the trend of the market and trade with it, which usually gives your trades an advantage over trading against the trend. Not every trend in the market is one you should jump into, but ignoring the price trend of the market altogether really is a recipe for disaster.

13. Keep trading costs to a minimum

These days brokers compete with each other to attract clients, so many of them charge low trading costs. Do not treat small charges lightly: the spread and the commission may be only a few tenths of a pip per trade, but multiplied by hundreds of trades a year they come to a considerable sum, especially for a short-term trader. Besides the spread, keep an eye on the swap as well if you hold positions for several days.

14. Plan your trades

Foreign exchange trading is not a gamble, it is a game of strategy. Always work out your next move carefully before you act. You can build a strategy set out in advance - if the market is in situation A, this is what you do next - and planning clearly like that helps you trade with more discipline.

15. Understand charts and trading tools

You will need tools, either built in or added on, to serve your trading. There are a great many different tools for the analysis you need - trendlines, horizontal lines, Fibonacci, indicators - but no tool can replace reading the price chart. If you genuinely understand the price movements on the chart, using the price chart for analysis is more effective than any trading tool.

16. Do not trade too much

Confidence in your trades is good, but trading too much damages your trading. Why? Because when you trade too much you put risk on uncertain opportunities with a low probability of winning. Focusing only on the signals that fully satisfy the conditions in your plan helps you build a careful, disciplined trading habit.

17. Do not be too greedy!

Greed can make you carry risks you do not need. Set a maximum loss and a desired profit for every trade. When price is close to your stop loss level, never move the stop further away in the hope that price will come back; when price is close to your take profit, do not let greed push the target further out with nothing to base it on. (Moving the stop loss to break even to protect a profit is fine.) This is one of the most important forex tips for you to follow.

18. Always use a stop loss

For most professional traders the stop loss is a matter of life and death for their career in financial trading. You can hardly know how far the market may go against your entry point. Not placing a stop loss is like handing the fate of your trading account over to the market: when a tsunami arrives, everything gets blown away.

19. Keep a trading journal

This is a very useful forex trading tip. If you do not keep one yet, start writing a trading journal to track your trading performance. It is a tool that helps you learn from past mistakes. See also: Why should you write a forex journal every day? Make sure you always keep the journal up to date as honestly as you can.

20. Test your trading strategy

One of the forex trading tips that gradually turns you into a professional forex trader is adjusting your trading strategy little by little. And at that point, testing past data to get statistics on the win probability of your trading strategy is absolutely necessary. You can use the Strategy Tester built into MT4 to test the strategy (backtest) on past data, or Replay mode on TradingView to practice entering candle by candle. Note that a good backtest result is no assurance of future results.

Final word

Do not let forex trading frighten you or rush you; prepare thoroughly and keep at it instead. Trade with discipline and consistency. Forex trading tips can help you, but the rest is down to you, and no tip removes the risk of the market.