Forex Trading Tips

Start by identifying your trading style and risk profile. Then, consider tips for selecting trading platforms and Forex brokers. Finally, review trading advice on how to manage your portfolio of Forex trades (Forex Money Management)

 

The Forex Automatic Trading Tips

Forex Tip-(1): Define your Trading Style

Each trading style is defined by two factors: the time horizon and the risk profile.

(i) Time Horizon (Trading Timeframe)

The chosen timeframe determines how frequently you trade. Higher trading frequency results in increased transaction costs, which raises the overall risk of your portfolio. If you are not an advanced Forex trader, avoid trading on low timeframes.

(ii) Risk Profile (Appetite for Risk)

Your acceptable level of risk should match your trading experience. Beginner and semi-advanced Forex traders should focus on low-risk trading strategies.

Categorizing Trading Experience

By combining factors (i) and (ii), we can define three (3) categories of trading experience:

(a) Professional Traders

High Risk / Multiple Trades Per Day / Tight Stop-Loss / Medium to High Trading Leverage

(b) Experienced Traders

Medium Risk / Multiple Trades Per Week / Wide Stop-Loss / Low Trading Leverage

(c) Semi-Advanced and Beginners

Low Risk / Few Trades Per Week / Wide Stop-Loss / Very Low Trading Leverage

Advice

Beginners and semi-advanced traders who trade frequently or use high leverage are likely to lose their capital over time. Intraday trading is only suitable for experienced and professional traders. All others should focus on mid-term trading and limit leverage to a maximum of 5:1. » The Leverage Formula

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Forex Tip-(2): Selecting a Trading Platform

Today, Forex traders can choose from a wide variety of trading platforms. The industry standard remains MetaTrader 4 (MT4). However, the newer version, MetaTrader 5 (MT5), is steadily gaining popularity as more brokers adopt it. MetaTrader is an ideal platform for advanced and professional traders, especially those looking to implement automated strategies using Expert Advisors. The platform includes the MQL programming language, a built-in editor, and a strategy tester.

Alternatively, web-based trading platforms are easier to use and may better suit the needs of beginner and semi-advanced Forex traders. However, web-trading platforms are not recommended for day trading or automated trading.

Forex Automatic offers a wide selection of Forex platform reviews: » Review and Compare Popular Forex Platforms

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Forex Tip-(3): Choosing the Right Forex Broker

The best way to start trading Forex is by choosing an ECN or STP Forex broker. These are known as No-Dealing Desk (NDD) brokers. ECN and STP brokers provide the best trading conditions—tighter spreads, fast execution, and generally no price manipulation. In contrast, Dealing Desk (DD) brokers are not recommended for day trading or automated trading.

» Compare ECN/STP Forex Brokers

Profiling the Ideal Forex Broker & The Rating Formula

According to TradingCenter.org and their Rating Formula, the ideal Forex broker should offer the following features:

(i) Low Trading Costs

(ii) Safety of Funds

(iii) Reliable Technology

(iv) A Wide Range of Trading Options

These four key factors are broken down into multiple sub-factors, each assigned a specific weight. The Rating Formula uses this structure to evaluate brokers, generating a score from 0–100%. The formula is currently in version 4, designed specifically to assess Forex brokers.

» Read more about the latest versions of the Forex RatingFormula on TradingCenter.org

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Forex Tip-(4): Choosing Forex Trading Signals or an Expert Advisor (EA)

A Forex signal can be generated from various sources. In essence, trading signals are trade recommendations typically sent to subscribers via SMS or email alerts.

Other strategies involve using automated Forex signals or Expert Advisors (Forex robots). ForexAutomatic features a comprehensive section of reviews and comparisons of popular Forex signaling services and Forex robots.

» Compare Popular Forex Systems

In general, what defines a good signaling service—manual or automated—is a proven track record of past performance. Avoid Forex signaling services or robots that are relatively new and cannot provide verified data or historical performance results.

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Forex Tip-(5): Basic Rules for Effective Money Management

When you're ready to trade, there’s one thing you must never forget: your future trading success depends on two key factors:

(i) 50% on your accumulated trading experience and talent

(ii) 50% on your ability to wisely manage your portfolio

In reality, money management is more important than anything else. If you cannot manage your portfolio wisely, you're likely to lose all your capital in the long run.

 

How to Improve Money Management

(i): Always Apply Portfolio Diversification

Never open a position that exceeds 2% of your total portfolio value.

(ii): Accurately Calculate Your Trading Costs

Before executing any trade, accurately calculate the trading costs—including spread, commissions, and any swap charges from carry trades.

(iii): Trade Longer Timeframes

Longer timeframes help shield you from unexpected events and extreme market volatility.

(iv): Limit the Use of Trading Leverage

High leverage increases both risk and trading costs. Leveraging your funds 500:1 means extremely high risk and costly spreads, commissions, and swaps. There’s no practical reason to exceed 30:1 leverage. Wise traders typically use even lower ratios.

(v): Always Place a Stop-Loss Order on Every Trade

No matter your trading timeframe, always use a stop-loss order. Market conditions can shift at any moment. A stop-loss costs nothing but can protect your portfolio in the long run.

Also, avoid holding positions over the weekend, as the market may gap and fail to trigger your stop-loss order effectively.

(vi): Run Your Profits and Cut Your Losses

If a trade is profitable, don’t rush to close it. Adjust your stop-loss to a break-even or better level, but let your profits run. Conversely, if a trade is losing, don’t increase your position. If the price hits your stop-loss, take the loss and move on to the next opportunity.

Professional traders generate 80% of their profits from just 20% of their trades. They succeed by letting that 20% run and cutting the rest quickly.

(vii): Filter Your Daily Trading Activity with Rules

Apply daily risk-control rules. For example, if you’re a day trader, stop trading for the day if you lose 5% of your portfolio value or experience three consecutive losing trades.

» Read More on Money Management

 

■ Forex Automatic Trading Tips

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