10 Solid Tips to Improve Your Forex Trading

Have you already studied up on and practiced the basics of forex trading, and find yourself looking for some new techniques to work with? Following are ten  tips and techniques you can use to help improve your trading. If one is not familiar, do a little additional side reading on it and before you know it, you will be trading using the same methods that experienced traders use. 

1. Try using the “10 pips per day” trading strategy. This means that you will target a profit of only 10 pips per day. The strategy requires you to set one trade per day, with any currency, immediately after the first candlestick opens on a new trading day. Place a Buy order 30 pips over open price, a Stop order 30 pips below open, and a stop loss at 50 pips. Take your profit at 10 pips. Repeat daily. 

2. Use the RSI, or relative strength indicator, to help evaluate the market’s activity. This is a trading indicator of the oscillating type, and the RSI shows the speed of the market’s changes in price. Generally, if the RSI is above 50, a trend is considered strong enough to trade on. Below 50 means the trend is weakening. Some traders use 70 and 30 as interpretation points. This is a commonly-used indicator that takes a moving average of price growth over a certain number of periods. 

3. Use the fast moving averages crossover indicator. This is an easy-to use indicator that works well when strong trends are taking place in the market. It also works with large price moves and large price break-outs. Be aware that this is a lagging indicator, which reflects the market’s current status rather than showing its prediction of future activity. 

4. Study strategies that are tailor-made for your currency pair. Certain commonly-traded pairs such as the USD/EUR have many strategies based on the way they typically trade in the market. More exotic pairs have different drivers behind their trading activity and may need completely different strategies to make money trading them. 

5. When choosing a trading system, check the trading indicators it offers. Look for the stochastic oscillator as one of the options. This popular indicator, created in the 1950s by George Lane, has been around longer than other indicators such as the MACD and RSI. The stochastic oscillator is a momentum indicator. It works by considering the closing price in relation to the range of highs and lows over a set number of bars. 

6. Experiment with trades in a short time frame. One variation of this method, known as scalping, consists of small trades that are executed quickly. Some traders keep these trades open only for a few minutes, just long enough to make a few pips of profit. Many argue this is a risk-reducing strategy because you can get out of the market before you accrue any huge losses, but the method is not without its critics. 

7. Create a support-resistance spread you are comfortable with. Some people call this a tunnel. It consists of trend lines drawn on your chart to identify the areas of support and resistance in the market. When prices break through the lines and bars close outside your tunnel, make a buy or sell in the breakout direction. Many believe that the exit cue is when the market price crosses one of your trend lines, and travels at least the same distance as the width of your tunnel. 

8. Draw your trend lines right before markets open. This is part art and part skill. Many books suggest joining two or more consecutive low points or two or more consecutive high points. But it’s knowing which ones to look at or ignore that matters. If you draw your trend lines right before each market opens, you can filter out a lot of noise that takes place in early trading in the relevant market. 

9. Figure out which are the best market hours for scalping. Scalping works best in a strong, trending market. Try to avoid scalping when markets are opening and closing. This time frame varies depending upon what time zone you are in. When markets open and close, they bring too much choppiness and volatility, making it tough to make any quick profitable trades. 

10. Always maintain good money management and use your leverage wisely. Nothing is worse than getting your trades set up, watching a big shock happen in the market, and then finding your broker closed out all your trades and cleaned out your trading account because you were trading with too much of your margin. 

Forex trading is a continual learning and fine-tuning process. The intellectual challenge of trading is what keeps many people coming back, aside from the potential profits. Keep learning, keep growing your trading skills and knowledge base, and you will be making more consistent profits before you know it.