Top Tips for Intermediate Forex Traders

The World of Forex trading can be a tough place to make a start in, especially if a trader is just starting out or only have been in the game for a short while. Yes, experience is key when it comes to trading but a few quick tips can’t hurt the process either.  

When it comes to Forex trading the KISS principle will apply. “Keep It Simple, Stupid”. It is a principle established by the U.S. Navy in the 1960’s. The KISS principle states that most systems work best if they are kept simple and are not made complicated, therefore simplicity should be a key goal and unnecessary complexity should be avoided. 

The first thing that every trader should know about the Foreign Exchange, or Forex Markets, is that every day differs. New economic policies, events, trade, laws, and much more will shape the way that the markets are going to go. Traders should know that the market is dynamic, and ever changing. In truth, traders will trade currencies that are essentially based on economies that never stop moving! And this is an intimidating thought, right?

Learning how to successfully and correctly trade the forex market can be a complicated undertaking. Most people see the Forex Market as a get rich quick opportunity, but this can’t be further from the truth and is essentially unrealistic. Forex trading can be overwhelming, especially for beginners and intermediates alike who might not have a full understanding of the rules yet.

In this article we have compiled a list of quick-fire tips to help both beginner and intermediate trader becomes successful Forex traders.

First things first – The Broker and The Trading Platform

Nothing will benefit a trader if they do not get the basics right. Even intermediate traders could have made the wrong choices when they started off, but it is never too late to make a better and informed choice.

Choosing a reputable and regulated broker is of the utmost importance and investing some time into researching the differences between brokers will be beneficial in the long run. Traders must know and fully understand each individual broker’s policies.  Traders must also ensure that a broker’s trading platform is suited to the analysis they want to do. 

Define Goals and a Trading Style

When starting out in the Forex Market, traders must have an idea of goals and how they will achieve this. It is extremely important that a traders trading method is capable of achieving the goals set. Each trading style will carry a different risk profile, which will require a certain attitude and approach to trade successfully.

To give an example, if a trader won’t be comfortable leaving a trade open overnight, they may like to consider day trading instead. Traders must make 100% sure that their personality fits the trading style they choose. 

General Trading Tips

Choose the Best Place to Trade

Most Forex traders will be trading from home and they should make sure that they have a comfortable and quiet place to go through charts and important information without any distraction and always keep a notebook or spreadsheet at hand to make notes.  Many Forex Trading journals are available online for download.

 

Longer-term charts to Start

Whether a trader is just starting off or is intermediate, it is always recommended to start trading on longer-term charts, such as daily charts. This will give a trader enough time to analyse the Forex market and look for trading opportunities.  Once a trader has become comfortable with this type of timeframe, they can start to look at day trading and 

Trade in cross-pairs

A common mistake made by many Forex traders in the market is focusing on mostly major pairs. Major pairs include the US dollar and one of the seven remaining major currencies, such as EUR/USD and GBP/USD  Cross-pairs on the other hand include any major currency except the US dollar, e.g. GBP/JPY, AUD/NZD, and EUR/AUD and often hide excellent trading opportunities plus they offer just enough volatility to make an attractive profit.

 

Follow other markets

No one financial market is truly isolated from other markets, and Forex is no exception. Start a morning routine that starts with checking the performance of major equity indices, the price of gold and a take a look at a currency pair or two. 

Trend-Following Tips

Every Trader loves a good trend as they offer massive profit potential at a small risk. Here are our top tips for trend-followers.

Trade in the trend direction

Trend-following trading strategies have proven themselves time after time and are amongst the best strategies a trader can choose. A trader will trade in the direction of the established trend and not against it. 

 

Buy low and sell high

 “Buy low, sell high” is a popular saying in the trading fraternity but, how low is low enough?  When a trend is strong, market corrections will usually reach around the 38.2% Fibonacci retracement level. Weaker trends have corrections that can reach the 61.8% level. Traders should always get into a trend when prices start to fall and professionals will buy low, while intermediates tend to buy at the highest point of an uptrend.

 

Confirm a trade through the use of candlestick patterns

Candlestick patterns are a great tool and it reveals the psychology of market participants. Traders should not only trade based only on candlestick patterns but they do work well as a confirmation tool. They are the best tool to indicate price action in the present, hence the saying amongst traders which goes “Price is King”.

Mark both peaks and troughs in the market

When markets trend, they form both higher highs and higher lows during uptrends and both lower lows and lower highs during downtrends. Making a note of these peaks and troughs can provide traders with a clear picture of where the market is heading. 

 

Stay up-to-date on market fundamentals

Market fundamentals can catch investors of guard and staying up to date on market fundamentals and important news releases will place traders head and shoulders above other traders. Most reputable trading websites have an Economic Calendar which shows the daily activities on the economic calendar. In this regard www.myfxbook.com and www.forexfactory.com are good references. 

Technical Indicator Tips

Technical indicators can be both captivating and confusing at the same time, but there are a few tips that will help traders to make the most out of them.

Stick to a couple of indicators

The most common mistake traders make when it comes to technical indicators is using an abundancy/ too many indicators. Traders may apply too many indicators to their charts which leads to a distortion of facts and real price action. In extreme cases the price-chart is so overwhelmed with indicators that the price-chart can barely be seen. Always apply the following two principals in technical charting: KISS – “Keep it Simple Stupid” and “Less is more”.

Indicators come in four main groups:

  • Trend indicators
  • Oscillators
  • Volatility indicators
  • Volume indicators

Indicators can be contradictory

Indicators from different groups can sometimes provide traders with contradictory trading signals. Trend indicators give traders a buy signal when prices rise, but oscillators say “sell”. When prices fall, trend indicators will send a sell signal while oscillators become oversold and yell “buy”. 

Forex Broker Tips

There is a multitude of currency brokers who compete for every new client looking to make a start in the forex market. Some may offer low trading costs while others convince traders with their extremely high leverage or sign-up bonuses. Here are a few tips to keep in mind when choosing a Forex broker.

Cheaper does not necessarily mean better

Traders should never fall into the trap of looking for the cheapest broker. Always look for a licensed broker that offer all trading instruments needed and is backed up by a reputable reputation.

 

Avoid unregulated brokers

Traders must always look for brokers that are properly regulated and secure because this will ensure that the broker follows high industry standards and that all the trader’s capital will be 100% safe.

 

What trading instruments does the broker offer?

Having a wide range of tradeable instruments will make sure that a trader will never miss a trading opportunity in one of the markets.

Other tips and tricks to keep in mind include –

  • We cannot hammer enough on the importance of education! Traders must take the time to study technical analysis of currency pairs and what affects and move them before risking their capital.
  • A trading plan is critical and must include profit goals, risk tolerance level/risk management, methodology and evaluation criteria. 
  • Know your limits. This includes knowing how much a trader is willing to risk on each trade, setting their leverage ratio accordingly, and never risking more than they can afford to lose. In this regard a trader must acquaint him/herself with the 1% rule which applies to risk management in the trading environment. 

Learn to Trade Step-by-Step

As with every new activity a person takes on, trading is no different and requires traders to start with the bare basics, and move slowly until they understand the “playing field”. 

Control Emotions

Traders should take care that they don’t get carried away by their emotions, especially when experiencing a losing streak. A level head and open mind will help a trader to stay rational and make skilled choices. When a trader lets their emotions take over, they expose themselves to unnecessary risks. 

Stop the Stress!

Easier said than done right?  But trading under stress will undoubtably lead to irrational decisions, and in live trading, that will most likely come at a cost to a smaller or larger extent.  Traders should identify the source of their stress and try to eliminate or lessen the influence. Take a deep breath, listen to some music, or exercise. Learn what works best

Practice Makes Perfect

Practice, Practice, Practice!  Traders are not likely to succeed without constant trading practice. Traders probably won’t want to lose money while learning the basics so trading on a free demo account is a great way to start.  

Psychology is Key

Before a trader plans their next move, they must analyse market movements and review their own psychology. Traders should ask themselves –

  • Did I show signs of confirmation bias?
  • Did I make a trade out of frustration?
  • Why did I choose this particular currency pair?

Mastering their psychology will help traders to protect themselves from possible losses along the way.   Many literature (books and internet articles) are available which specifically deals with the psychology of trading. And psychology plays a huge part in trading success or failure. Psychology in trading is KEY.

No Risk, No Success

Honestly, not even 100 Forex trading tips and tricks will guarantee a trader’s success. From the start traders must accept the possibility of failure. Traders won’t make profitable trades 100% of the time so they need to be realistic about their Forex trading methods and goals.

Patience is a Virtue

When it comes to trading, this old saying rings true. True success is never immediate, but a result of consistent work and planning. 

Continuous Education

In each trading day, there will be a new lesson to learn. Traders should take a close look at the Forex market and keep all the tips they have learnt in mind. Start by analysing news, trends, and financial processes, and keep up to date with the Forex basics. Study, practise and study some more. Repeat this process as often as necessary. 

Studying the market will require a lot of time and effort, but it will be extremely beneficial in the end. 

Take a Break

Take some time away from the computer, especially during stressful trading sessions. When a trader has multiple computer windows open and multiple data streams to analyse, a feeling of pressure will obviously be present. If this is the case, it is better for traders to take a break, walk away and take some time to collect their thoughts. 

Trends are a Good thing!

Traders should learn about trends as the ability to spot trends is an extremely valuable one. Always trade in the direction of the trend. Always have a look at the weekly and daily timeframe in order to establish in what direction the market is trending before opening positions on shorter timeframes. Trading against the trend may just lead to disaster. Trends can show traders what is coming, and traders can accordingly adjust their trading, rather than react when it is too late. Always remember: “THE TREND IS YOUR FRIEND” and in conclusion “WHEN THE TREND BENDS IT’s NOT YOUR FRIEND”.

Look for Competitive Conditions

Traders should choose a first-class broker with favourable service conditions and favourable spreads. 

Plan in Advance

Forex trading is a strategic game. Traders should carefully calculate their next move before they act. Formulate a plan. Traders should ask themselves a few challenging questions including:

  • Have I accounted for the possibility of loss?
  • Plan B – for the different types of scenarios that may arise?

To be successful at Forex trading, traders need to expect the unexpected.

Know the Charts

Traders will be trading on many different markets and will need to understand the information they analyse for each trade. Luckily, there are several tools available to traders that make trading easier, but nothing is more efficient than charts. Charts provide traders with fast access to data in the form of a simple visual reflection of real-time price action.

Don't Overtrade

Know your limit. If a trader trades too much, they will harm their chances of success because overtrading leads to a lack in focus and careless trades which includes so-called revenge trading to make up for a loss. When a trader develops their trading plan, they must establish the maximum amount of trades they will make per day or week and stick to it.

Don’t get greedy!

Greediness can make traders take unnecessary risks. Traders should set the maximum loss and desired profit within their trading plan and when this level is hit, they should stop. This is one of the best tips when it comes to successful fund management. Greed will destroy you in the long run.

Make Use of Stop-Losses

A well calculated stop-loss is a highly rated trading tool and will always protect you from ruin. NEVER trade without a stop-loss. Not setting a stop-loss may give traders an excuse to keep a bad position open. Bad situations rarely improve, and neither will a trader’s profit if they don’t trade wisely.  A correctly placed stop-loss eliminates the risk of a trader losing all of their money on a single bad trade and it is especially beneficial when traders don’t have the ability to close positions manually. 

Most popular forex trading platforms will allow traders to place a stop loss on their position and if this feature is not on offer, rather avoid the platform. The reality is, no trade is 100% certain for success. And the only way for a trader to protect themselves and their capital from the market volatility is to have a hard stop order in place for situations where the market might start to move in the wrong direction.

Many different strategies are available which forex traders can use in determining where stop losses should be placed and some traders use a simple pip count, some use recent market structure and other use the Average True Range (ATR) indicator. Other strategies place stops to limit losses relative to a traders account balance. These traders might choose to risk no more than 2-3% of their account in any single position. Whatever strategy a trader decides to choose, it is important to keep in mind that no forex position is risk-proof and that the only way to avoid extreme and unnecessary losses is to have a hard stop order in place at all times.

Analyse Trades

Traders should keep track of their trading activity as this will help them to monitor their performance and find patterns. Traders should learn from their past mistakes and keeping track will improve a trader’s discipline. Note everything and be honest. In this regard the keeping of a trading journal is paramount.

Experiment

Traders should be able to flexibly adjust their strategy by being willing to try out new things and always aim to improve their trading. The FX market is constantly evolving and so should the trader.   

The Bottom Line

The tips and tricks mentioned above will lead traders to a structured approach to trading and should help them become a more advanced trader. Traders shouldn’t let Forex currency trading scare them off or even make them give up, especially when it feels like the odds are against them. Traders should remember that Forex success is based on preparation  and perseverance..  Trading is an art form in its own, and the only way to become profitable is through consistent and disciplined practice.

As we have stated before, forex trading should be viewed as a long-term enterprise and not a get rich quick scheme. Traders that fail to avoid risk will inevitably set themselves up for failure through unrealistic expectations that can never be achieved on a consistent basis. Appropriate trade planning must always include conservative money management, where risk-to-reward ratios are favourable and achievable over the long-term. There are many different strategies for how these practices can be executed but some general rules must be honoured if a trader wants to keep their account balance healthy and growing.

Yes, Forex tips and tricks will help traders to prepare – but the rest is up to them!

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