Forex Trading Tips

  • 01

    Do your research

    As a forex trader, it is essential to study and follow the currency market to maximise your chances of being profitable. This also includes monitoring the factors known to potentially influence a currency’s value. Reading up on forex-related news for updates on economic and political events can be key to improving your trading returns.

  • 02

    Keep track of your positions

    Because Forex markets can be so fast moving, it’s recommended that you closely watch your open positions. ETX Capital provides trading apps which are available on iPhone, iPad and Android devices, so that you can always keep track of your trades, wherever you are.

  • 03

    Manage your risk

    The currency market movement carries with it much uncertainty – although returns can be great, losses can be just as significant. It is therefore a good idea for you to have a plan in place before you start to trade. Before placing a position, plan exactly how you will trade by doing your research and choosing currency pairs that are optimal for you. Consider the amount of time you aim to stay in a position and set goals for that position. For example, before opening a position, create an exit strategy, deciding at what level of profit you will close the trade – or alternatively, what level of loss. It is important to make these decisions before you start trading, so that you can place your stops and limits accordingly.

    Stop-loss facilities are highly recommended in order to protect capital in the event of sudden market movements against your position. ETX Capital offer stop loss tools, and for long-term positions, ETX Capital’s premium guaranteed stops remain in place outside trading hours – and will take action even when the market surges. This is a useful way of enhancing your protection against slippage.

  • 04

    Watch out for emotional pitfalls

    Many trades are unsuccessful because they lack discipline. Once you have money invested in a trade it can be much more difficult to take an objective view of the market. For example, when the currency suddenly moves in the opposite direction to a trader’s prediction, a trader will often dismiss signals that are indicative of continued losses – in hope that their trade will eventually go according to their plan and become profitable. Loss limits can be particularly useful in these instances, as it can be better to cut your losses earlier, rather than suffering from a larger deficit at a later stage.

    In another sense, trading right after learning of a significant hit to your trading position can be extremely detrimental, as this can lead traders to take larger risks on a whim in order to try and regain lost funds. If you have received bad news, it is advised that you take a short break and shut down your screens, so that you can return afresh to trading with a clear mind, instead of making rash decisions based on emotional reactions.

  • 05

    Keep in mind the bigger picture

    Although touched upon in the paragraphs above, it is worth emphasising that regularly monitoring your funds and keeping your profit targets in mind can help you make trading decisions more effectively and avoid making impulsive choices.

    Regardless of the way you choose to trade, it can be advantageous to observe wider market movements and general long-term market direction, in addition to more short-term fluctuations in the market.

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