This page contains a comprehensive list of hands-on practical forex trading tips for executing trades on the spot forex market. These free forex tips are dynamic and have been rewritten several times based on the input of our experienced client base.
Tip 1 - Always trade in the direction of the trend. The foreign exchange is a large market and the trends, momentum, and movement cycles tend to last longer than other financial markets. If you don't know the trends of the market or consistently trade against them it will cause pain and losses.
Tip 2 - Always trade with a stop order, not because you expect to lose, but to prevent a large loss from an unexpected news event like a currency devaluation, terrorist attack, tsunami, or some other unexpected worldwide event. Nobody can predict tomorrow. These very market conditions may even prevent a stop order from being executed exactly where you place it. Please consult with your broker on their written policies and details of how they execute stop orders.
Tip 3 - Another forex tip is to know the currency pairs you trade. Most traders trade one or two pairs. Since we trade 28 pairs there is a bit of a learning process. Some currency pairs move fairly slow and some move extremely fast.
Slow moving pairs include the NZD/USD, AUD/NZD, NZD/JPY, EUR/GBP, AUD/CAD and CHF/JPY. The next group moves a little faster like the AUD/USD, EUR/CHF, and AUD/JPY. Intermediate volatility pairs include the EUR/USD, USD/CHF, USD/JPY, EUR/JPY, CAD/JPY and USD/CAD. High to very high volatility pairs include the GBP/AUD, GBP/CAD, GBP/USD, GBP/CHF, GBP/JPY, GBP/NZD, EUR/AUD, and EUR/CAD.
Tip 4 - After you enter a trade you can use these guidelines for initial stop order placement. Initial stops for slower moving pairs should be in the range of 20-25 pips. Just verify where the pair was trading as it was consolidating in the last few hours before the current movement started using a conventional bar chart found on most brokerage platforms. You can also check the free forex trend indicators.
Look at the recent "lows" and "highs" on the smaller timeframes on the free trend indicators established in the last few hours prior to the start of the movement. Initial stops for buys should be placed immediately below the recent lows as the pair was consolidating for the last few hours of trading prior to the upward movement starting.
Initial stops for sells should be placed immediately above the recent highs as the pair was consolidating for the last few hours of trading prior to the beginning of the movement to the downside. For more volatile currency pairs you can add 5-15 pips to your initial stop, initial stops on these pairs would be 30-40 pips. These are excellent guidelines for new traders but more experienced traders will modify these initial stop guidelines as they develop some experience.
Tip 5 - Always know your money management ratio or risk /reward ratio for each trade you take. This is a great tip. If a trade has 100 pips of potential and you enter the trade with a 30 pip stop at the outset, then the money management ratio is 100/30 or 3.3 to 1 positive. The higher the money management ratio, the better.
Everyone has losses. It's going to happen. Just keep them small and manageable and with the proper ratio of wins and losses and the proper money management ratio and you will be fine. You will get stopped out at some point, its a fact of life and part of trading. But even with a 50% success rate and the proper money management ratio your account will grow. Some spot forex trades that we point in our trading plans have money management ratios of 15-20:1, which is excellent. We trade the forex using swing to position style and only take shorter term trades when the forex market conditions dictate this.
Tip 6 - As part of most ForexEarlyWarning trading plans we provide you with a price alarm point at a critical area of support and resistance on the currency pairs we track. Generally speaking this is the first level of support or resistance. The reason for this is that we want to intercept the price movements but spend less time in front of the computer. Please make sure you have access to price alarms prior to becoming one of our clients. Desktop and wireless price alarms for up to 28 pairs are available at no cost on almost all spot forex trading platforms, even demo accounts. You can set up our free trend indicators on metatrader and desktop price alarms are built into the platform.
Tip 7 - Many forex traders try to do too much in their life and they lose a lot of sleep and it sometimes winds up costing them their health. Its not worth it to trade under these circumstances. Consider getting a trading partner and opening up a joint account with them. Make sure your trading partner likes trend trading also and that you both think alike. You can meet online in a chat room or Skype daily and discuss trades. Make the forex a great part of your life and keep a good balance. The forex should never be a chore. If you review Lesson 14 in our training package it tells you the best times to trade the forex market for efficiency.
Tip 8 - Entry management is one of the pillars of forex trading. Our clients have access to a unique tool called The Forex Heatmap® to verify the entries on all trades and we have a distinct advantage over other traders. All clients have access to this entry management tool as part of their subscription. These entry management guidelines are for new traders, veterans may modify these guidelines somewhat . Below are three specific methods for managing entries.
Time Method - After you enter a trade that is verified by The Forex Heatmap® you can give the trade 30 minutes to one hour to continue in the direction of the trend. If you check the trade later and the trade has moved +30, +40 pips or more past the entry price just move your stop to break even.
Trades that Stall - If the trade stalls out at plus or minus 10 pips after 30 minutes to 1 hour after entry it is best to exit and live to trade another day, this will not happen too often if you are using The Forex Heatmap® correctly. Check the trend indicators to see if you are early in the move and do not have layers and clusters of resistance or support nearby.
Partial Limit Orders and Alarms - After you enter a trade another trade management method involves the use of price alarms combined with limit orders. For example if you enter a trade with 4 mini lots you can set a limit order for 2 mini lots at +40 pips or more and set a price alarm on top of the limit price. If the alarm hits you can move your stop to break even on the remaining two mini lots and even if the pair reverses you walk away with a profit. Once again if you are using The Forex Heatmap® correctly this is not likely to happen. For more detailed trade entry verification and forex money management techniques see our 35 lesson package.
Tip 9 - If you have any currency pair that has moved strongly in your favor you can close out half of your lots, the "rule of thumb" we use, adjust your stop order on the remaining lots to break even and let the remaining lots ride on the larger trends if they are strong. If you choose to close out a portion of your lots after a strong move you can do so at the end of the USD session in an approximate window of time around 10 - 11:00 am Eastern Time.
This is generally when the pairs end their moves and start to consolidate. Our general philosophy is to get your stops to break even then let the trend do the work. On any strong positive trades close out half of your lots and let the rest ride with the trend, another general rule of thumb.
Tip 10 - At ForexEarlyWarning we write out our currency trading plans and provide trade entry management plan guidance as well. Trading plans have been employed successfully in stock and commodities trading and they work well for the spot forex. In order to prepare a forex trading plan we conduct multiple time frame analysis across 28 currency pairs by individual currency group. We determine pockets of strength and weakness using a parallel and inverse analysis of individual currency groupings. This is completely absent from almost all trading plan and trade alert services currently available to forex traders. Then we evaluate support and resistance for the pairs we are planning for to determine specific price alarm placement points as well as potential for pips. To assist with understanding this process check this article about multiple time frame analysis.
Tip 11 - New traders to the spot forex can learn to trade with the less volatile currency pairs (see Tip 3) and then move to the more volatile pairs later. Get your feet wet first. Experienced stock and option traders generally know how to handle the volatility better but there is still a learning period. You can start off by only paper trading these volatile pairs, then graduate to microlot trading, then add them to your real money trading when your comfort level goes up. Each individual must decide when the time is right. If you continue to paper trade the most volatile pairs you will get the picture.
Tip 12 - When you buy or sell a currency pair you are paid or charged interest daily based on current worldwide interest rates across each region. The daily rollover interest, or swap, is paid into your accounts or removed daily based on the spot forex positions you are holding. When you paper trade see how the interest accumulates or is debited daily from your account. On certain pairs extra interest income can be accumulated over time, this is called a carry trade.
Tip 13 - There are times in your life when you should not be trading. When you are sick, distracted, have family issues, computer issues, or when you are dead tired. Admit it and trade when you are in the right frame of mind and the other important phases of your life are in order. Make the forex an important and positive part of your life and enjoy the other phases of your life equally. If there are no trades available taking a break from trading and the computer is good, spending time with family and hobbies will keep you well rounded in all phases of life and when you come back to the computer your mind will be refreshed and ready. This is a very valuable forex tip.
Tip 14 - At some point in your trading career, the electricity will go off, the internet will die, your software or trading platform will not be working, etcetera. Plan in advance for these types of problems and always use stop orders, a set of backup conventional price charts, backup trend indicators, backup forex quote system or website, smartphone, keep brokers phone numbers handy and programmed into your phone, etc. Always have a contingency plan in place or backup systems for your hardware and trading systems in place. Do not find out the hard way and blow up a trade.
Tip 15 - Some conventional chart patterns are very important and can help you to be a much better trader. Focus on recognizing pennants, flags, double tops, double bottoms, ascending and descending wedges, and oscillations. These forex chart patterns are easy to recognize and occur frequently on the currency market, they can also help to confirm your trend direction.
Tip 16 - When using forex economic news calendar to trigger a trade entry make sure you have a trading plan in front of you and only trade news in the direction of the trend like your plan says to. If The Forex Heatmap® indicates a trade against the trend just remember that this may likely be a short term trade.
Tip 17 - Currency trading is a step wise process, first you demo trade our trading plans using The Forex Heatmap® to guide your entries. If these trades go well, then start trading with micro lots or fractional mini lots, then build up to one mini lot, the multiple mini lots and then ramp up over time to multiple mini lots and beyond to full scale trading and regular lots. Build confidence as you go and don't expose yourself until you have your entry procedures, experience level and profit taking procedures down well. There is no substitute for experience and trading experience cannot be taught.
Tip 18 - Parallel and inverse analysis of the spot forex is ignored by almost all forex traders. We prepare our trading plans using parallel and inverse analysis, but parallel and inverse analysis can also be used at the point of entry to verify your trades. For example if we issue a buy plan on the USD/CHF and issue a price alarm at the first level of resistance just check The Forex Heatmap® when the alarm hits. The best case scenario would be the USD strengthening and the CHF weakening at the point of entry. Our clients report consistent profits on practically all entries under this scenario.
Tip 19 - Learning to be a longer term trend trader and managing your forex trades differently is not difficult. Anyone can follow this forex tip and teach and train themselves to do this, if you get into a nice trade with a lot of positive pips you can always take some profit by closing out half of your lots using the "rule of thumb". If the longer term time frames and trend indicate a solid forex trend just hold onto the rest of your lots with a break even stop and move the stop or scale out more lots as you go deeper into profit. We will identify the trends and entry points, so you can teach yourself to be a longer term trader.
Tip 20 - Trade only with the trend and market momentum of the spot forex. The forex is a massive market and the trends must be respected. To help you give you a mindset for being a trend trader all traders should consider reading the book by Michael Covel titled "Trend Following".
Tip 21 - The majority of forex traders scalp the EUR/USD or GBP/USD using standard indicators. This is completely ineffective. At Forexearlywarning we do not do this, we trade 28 currency pairs using swing to position trading. Our clients have a broader perspective of the entire forex market and parallel and inverse analysis of the market sets us completely apart. If you trade the forex using our methods prepare to completely change your approach to trading the spot forex. The methods you have used in the past have failed you so you just have to let go of the past.
Tip 22 - Our trade entry plans are written to be flexible for end users and are a reflection of the current market conditions. You do not have to trade if you do not want to and there will likely be another trade tomorrow anyway. Our pricing and free educational resources make fx trading a possibility for the long haul. Currency trading is now accessible and remember that you are always in control. If you are an experienced trader and you can set up our free trend indicators and price alarms or rate alerts on your current charting and trading platform if you wish. If you need a good set of free forex trend indicators and price alarms we have available to anyone at no cost.
Tip 23 - The trading plans come with instructions, read these trading plan instructions carefully before you start trading or demo/paper trading.
Tip 24 - The Forexearlywarning.com website is loaded with free forex educational information for subscribers and non-subscribers. The information is related to our market analysis techniques, entry management, and money management. The information is available as written articles, videos, slideshows, and click and play or downloadable MP3 audios. Just click around the Forexearlywarning.com website and find the links to this information. Enjoy these forex resources before or after you become a subscriber and learn as much as you can about the forex. We also sponsor forex webinars on Monday and Wednesday nights for any forex trader to attend. These webinars include weekly chart reading, currency pair analysis, support and resistance analysis, and question and answer session.
Tip 25 - Don't let the forex rule your life ..… you are in charge. Don't stare at the computer all day and all night. Always have a trading plan, yours or ours, set price alarms, and be aware of when important news items are being announced on the news calendar to minimize time in front of the computer.
Tip 26 - All currency pairs are either trending or oscillating all of the time in some form or fashion. Trending is a strong directional move up or down, oscillating is up and down movements and going sideways within a support and resistance trading range. We always trade in the direction of the trend but if a pair starts oscillating in a large range we notify you in each daily trading plan. When trading forex oscillations the trade duration might be shorter term movements and you must enter and exit somewhat more frequently unless the oscillation cycles are on the H4 time frame or larger.
Tip 27 - Always trade a number of lots you are comfortable trading, some people are paper/demo trading the spot forex, some are trading micro lots, others trade mini lots, and still others many regular lots. Always know yourself emotionally. As you get more experience the right trade will come along and you will automatically know when to increase the number of lots on entry. Experience is the key it will happen naturally. Start by paper trading and then micro lots, then measure your emotional reaction as you increase lots over time.
Tip 28 - If you have any questions related to our forex trading plans, free indicators, forex trading or Paypal payment and administrative issues please contact forexearlywarning at any of our four email boxes and include your phone number in case we need it. We offer a phone or Skype consultation to anyone who needs one.
Tip 29 - Individual currencies drive the market movements, not indicators, to match this you have to analyze individual currencies daily and get rid of all of the technical indicators that have failed forex traders for years. Don't trade indicators trade currencies.
Tip 30 - Set up some rules for trade entries, nothing complicated just 3 or 4 rules so you are consistent. This, along with a couple of rules for money management and you will start making pips much more consistently and avoid bad trade entries.
Trading the forex has certain risks, we provide forex traders with a full forex risk disclosure for all to read and be aware of. Using these trading tips daily will contribute to being a successful forex trader.