Forex Trading Tips – What They Actually Mean

Jul 8 • Forex Trading Training • 2203 Views • Comments Off on Forex Trading Tips – What They Actually Mean

With so many online brokers around providing free online forex education to prospective traders, it is not difficult to come across some meaningful and relevant forex trading tips. The problem though is when a neophyte or a start up trader reads through them, they fail to grasp the value of such tips. This is because they are written by experienced traders for the consumption of other equally experienced traders. Unless explained in a language understandable by these newbies, these forex trading tips are actually meaningless to them.

The following are a few of what are considered useful and important forex trading tips explained plainly in a way that will be understood well by others. Here are the witty tips together with our explanations:

 

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  • Tip # 1 – “Never Let Winning Positions Run into Loses”. What this means is that you should know when to take out your winning positions and actualize the profits. Ordinarily, Forex trainers will advise you to let the profits roll and maximize it but stop short of spelling out how and when to do it. As a result, most traders hold on to their winning positions too long and get caught in a market retracement that erases their profits and end up in loses. This happens often to forex traders without a trading plan and those who are too gullible to take out positions with small profit. They hang on too long hoping the market will continue in the same direction.

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  • Tip # 2 – “Logic Wins, Impulse Kills”. This means you should never trade on whims or without a careful analysis of the market and a trading plan. Trading without a plan is like gambling where the odds are always against you. Never trade on impulse.
  • Tip #3 – “Trigger Fundamentally, Enter and Exit Technically”. Simply, this means any move you make in the market must be based on carefully studied sound fundamentals (i.e. economic data, political events, financial news, etc.) and the entry and exit points for the trade must be based on reliable technical indicators and models.
  • Tip #4 – “Never Risk More than 2% per Trade”. This basically refers to a money management strategy where you set a cut loss or stop loss point at 2% of the required margin for each trade. This is a prudent money management strategy meant to minimize losses although different traders may feel comfortable with wider leeway at the onset.

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  • Tip #5 – “Never Add to a losing Position.” More sophisticated traders have developed the habit of ‘averaging’ or adding up to a losing position (i.e. initiating more positions in the same losing position). They often do this in the hope of recouping their losses faster. But no one really knows for sure where the prices are going in the next session, hour, day or weeks. What traders have to hold on are mere educated guess. Adding to a losing position may only compound your problems. The prudent approach is to cut loss early and prepare for a more opportune time to get in again.

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