When I was 20, I believed that I could be as smart as a guy who had spent 15 years in a profession due to the “technological” edge I had over him. My mindset changed quickly as I realised that you couldn’t be mature in something as technical as forex trading unless you practically (built up screen time) do it.
The best way to kickstart your learning is to follow in the footsteps of a veteran. So, after spending more than 10 years trading forex, I want you to share some tips on forex trading for advanced traders. Yes, we are never too experienced to learn something new! Remember, forex tips for beginners are different from that of advanced traders.
Depending on your mindset and intelligence level, forex trading could be simple (simpler) or complicated (more difficult). In the beginning, forex trading might appear straightforward. Forex is a currency trading marketplace, well a simpler way to look at it at least. Traders differ and use different methods to extract profits from the market. Some hedge, some scalp, some day trade, others swing trade. I know traders that purely open positions seconds before swaps are charged/paid. It may seem that your only job as a trader is to anticipate the direction of a currency pair and profit from it.
Forex trading, on the other hand, demands time, patience, and expertise. You will require a mix of fundamental and technical analytical abilities and a grasp of the factors that influence the currencies traded in the foreign exchange marketplace.
Being an advanced trader, before embarking on any journey, you must choose your goal and find out the way you will get there. For that, it is critical to establish specific goals and then confirm that your trading strategy is capable of achieving these goals. Each trading method has a unique risk profile that requires a certain attitude and approach in order to trade successfully.
For example, if you are unable to sleep with an open position on the market, you may explore day trading. Contrary to this, if you have funds that you believe will be appreciated from a trade position over a period of months, you may be a position trader. Just make sure your personality matches the kind of trading you do. Stress and losses may lead to a personality mismatch, unwanted emotions will surface.
Paying attention to daily pivot points is particularly important if you are a day trader, but it is equally important if you are a position trader, swing trader, or exclusively trade long-term time frames. Why? Because pivot levels are monitored by thousands of other traders.
Pivot trading might seem like a self-fulfilling prophecy at times. That is, markets will often find support or resistance or make market turns at pivot levels since many traders will place orders at such levels because they are confirmed, pivot traders. As a result, when significant trading moves occur off pivot levels, there is frequently no fundamental reason for the move other than a large lot of traders having placed trades expecting such a move.
I am not suggesting that pivot trading be your sole trading strategy. Instead, I am saying that regardless of your trading strategy, you should keep a watch on daily pivot points for signs of trend continuations or potential market reversals. Use pivot points and the trading activity that occurs around them as a confirming technical indicator that you may use in conjunction with any trading strategy you have chosen.
Consider the following pictures of two extremely distinct forex traders:
Trader 1 has a large workplace, a high-end, custom-built trading computer, multiple monitors and market news feeds, and a plethora of charts, each of which is loaded with at least eight or nine technical indicators – five or six moving averages, two or three momentum indicators, Fibonacci lines, and so on.
Trader 2 works in a small and simple office space, using just a laptop or notebook computer, and a study of his charts reveals only one or two – possibly three – technical indicators overlaid over the market’s price action.
If you guessed Trader #1 is the super-successful, professional forex trader, you were probably incorrect. In fact, the portrait of Trader #2 is more representative of a potentially consistent profitable forex trader’s operation.
There are virtually an infinite number of technical analysis lines that a trader may apply to a chart. But more isn’t always – or even usually – better. Considering into account a virtually limitless number of indicators typically serves to muddy the waters for a trader, amplifying confusion, doubt, and indecision and leading a trader to miss seeing the forest for the trees.
A relatively simple trading strategy, one with just a few trading rules and requiring consideration of a few indicators, tends to produce more successful trades.
In fact, I know one very successful forex trader, a gentleman who withdraws money from the market almost every trading day, who has exactly ZERO technical indicators overlaid on his charts with no relative strength indicator, no trend lines, no moving averages, and certainly no EAs or trading robots.
His trading strategy allows him to trade high-probability candlestick patterns, such as pin bars (also known as the hammer or shooting star patterns), that form at or near support and resistance price levels that may be detected just by looking at previous price movement in the market.
Hedging is a risk-minimisation strategy that involves taking both sides of a trade at the same time. If your broker allows it, a simple strategy to hedge is to initiate a long and a short position on the same pair. Advanced traders sometimes employ two different pairs to make a single hedge, although this can get quite complicated.
For example, suppose you decide to go short on the US dollar and the Swiss franc (USD/CHF) because they are at the top of a recent price range. You make the decision to take on short. After placing your short position, you see that the USD/CHF is looking a bit strong, and you fear that it may break higher, making your short an expensive one.
To do an advanced balancing act, you begin by considering other USD pairs. You discover that the euro-dollar pair (EUR/USD) moves inversely (oppositely) to the USD/CHF. You are short EUR/USD to complete your forex hedge. The USD eventually breaks through resistance and surges against the CHF. Your short EUR trade is a winner, and your long USD/CHF trade is a loser, but your risk is limited since they practically level out.
While this is common sense, ignorance of the principle or carelessness in its employment has caused disasters for many professional traders throughout history. Nobody knows where a currency pair will go in the heading hours, days, or even weeks. There are many educated anticipations but no knowledge of where the price will be in a short period of time.
As a result, the only definite value in trading is now. There isn’t much to say about the future. As a result, unless you love gambling, there is no point in adding to a losing position. A position in the red may be permitted to survive on its own in accordance with the initial plan, but adding to it is never an advisable practise.
After joining any market as a trader, you must decide how you will execute your trades. It’s better to understand what information you will need to make an informed decision on whether to open or quit a trade. To find the optimal moment to execute the trade, some traders prefer to monitor the economy’s underlying fundamentals and charts. Others rely only on technical analysis.
Whatever methodology you use, be sure it is consistent and adaptable. Your ecosystem should be able to adapt to changing market dynamics.
My advice to advanced traders is to take a leap of faith in position trading. Trading based on your entire exposure to a currency pair is known as position trading. Your average price for a currency pair is your position. For example, at 1.40, you may make a short trade on EUR/USD. If the pair is finally heading down but retraces up, and you place another short at, say, 1.42, your average position would be 1.41. Once the EUR/USD dips back below 1.41, you will be back in overall profit.
Many advanced traders are perplexed by the contradicting information that appears while viewing charts in multiple periods. What seems to be a buying signal on a weekly chart may appear to be a selling opportunity on an intraday chart.
So, if you get your prime trading direction from a weekly chart and use a daily chart to timing entry, be sure the two are synchronised. Putting simply, if the weekly chart indicates a purchase signal, wait until the daily chart verifies it. Maintain consistent time.
It is a contract to buy a currency pair at a predetermined price on a future date. For example, suppose you are long the EUR/USD at 1.40 and believe it will decline to 1.38 in overnight trading. To risk a deeper reaction, you place a stop loss at 1.3750, setting up a potential loss of 250 pips.
250 pips sound very painful, so you decide to use a forex option to lessen the pain. You purchase an overnight option with a strike price of 1.3750. If the EUR/USD rises but never reaches 1.3750, you will lose the premium you paid for your currency option.
If the EUR/USD falls and comes into contact with your option and your stop loss, you will receive the profit from your option, depending on how much of a premium you paid, and you will lose your long trade on the EUR/USD. The options profit would make part of your currency trade loss.
Being an advanced trader, it is my tip for you to learn calculating expectancy. Expectancy is the formula you use to assess how reliable your system is. You should go back in time and assess all of your winning against losing trades, then calculate how lucrative your winning trades were versus how much your losing trades lost.
Examine your most recent ten trades. If you haven’t made any actual trades yet, go back on your chart to where your system would have recommended you should enter and exit a trade. Determine if you would have earned a profit or a loss. Make a note of the results.
Although there are many methods for calculating the percentage profit made to gauge a successful trading strategy, there is no assurance that you will earn that amount every day you trade since market circumstances might change.
However, here’s the way to calculate expectancy [% Won * Average Win – % Loss * Average Loss]
If you have taken ten trades and six of which were winning trades while four were losing trades, your win ratio would be 6/10 or 60%.
Your average win ratio would be $400 ($2,400/6) if your six trades made $2,400. While if your losses were $1,200, then it would be $300 ($1,200/4).
[% Won * Average Win – % Loss * Average Loss]
(.60 * $400) – (.40 * $300) = $120
On average, a trader will earn $120 per trade.
Scalping is an extremely short-term trade for a few pips that is frequently done with high leverage. Scalping is usually best done in conjunction with a news release and supportive technical conditions. The trade might last from a few seconds to many hours.Can you lose more than you invest in forex? - Depends — 2023
Many new forex traders begin by scalping, but it doesn’t take long to realise how much money you might lose if you don’t know what you’re doing. Scaling, in general, is a risky strategy that does not pay well in comparison. If you are going to scalp, it is best to do so in conjunction with your overall trading position rather than as your primary trading method.
The opportunity to trade on margin, or leveraged trading, is one aspect of the forex market that draws many traders. Trading with a small initial deposit may nevertheless allow you to create relatively large positions, so be careful not to overdo it when deciding on the size of the trade.
Forex is usually traded with a high degree of leverage, which means you may offer just a small percentage of the actual amount you are investing while sustaining profit/loss as if you had invested the whole nominal amount.
There is a chance you may incur a loss equivalent to part or possibly all of your initial investment. It is also possible to lose more than you initially invested in your trading account.
Before you start trading, you should decide how much risk you’re willing to take on each trade and how much money you can realistically make. A risk-reward ratio assists traders in determining if they have a chance to profit in the long run.
For example, if the potential loss for each trade is $200 and the potential profit per trade is $600, the risk-reward ratio is 1:2.
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Such orders, which exit the position at a specific exchange rate, may help to limit risk. Stop-loss orders are an important forex risk management tool since they allow traders to limit their risk per trade, preventing significant losses.
Using the previous example, imagine the trader had an extremely wide stop-loss order for each trade, which meant they were willing to risk losing $1,200 every trade while still making $600 per winning trade. Two winning trades might be wiped out by a single loss. If the trader suffered a string of losses as a series of being stopped out by adverse market moves, a considerably higher and unrealistic winning percentage would be needed to make up the losses.
Although having a winning trading strategy on a percentage basis is important, managing risk and potential losses are also important so that they do not wipe your brokerage account.
When the markets are closed for the weekend, review weekly charts for trends or news that may affect your trade. Perhaps a pattern is forming a double top, and experts and news outlets are predicting a market reversal. This is a kind of reflexivity in which the pattern prompts pundits, who then reinforce the pattern. You will make the greatest plans under the cold light of objectivity.
For pro traders, a printed record is an excellent learning tool. Print a chart and write down all of the reasons for the trade, including the fundamentals that influence your judgments. Mark your entrance and departure positions on the chart. Make any relevant remarks on the chart, including emotional motivations for taking action. Did you become scared? Were you too greedy? Were you stressed out? Only by objectifying your trades will you be able to build the mental control and discipline to execute according to your system rather than your habits or emotions.
When you make a trade as an advanced forex trader, you should consider all of your options. Advanced trading, in addition to masterful risk management and extreme caution, maybe a supreme technique to make gains and limit losses. Advanced trading tips simply include taking advantage of market dynamics.
While it may vibe like a pipe dream, being a full-time forex trader requires you to effectively develop your skills. Failure to accomplish this may impede or perhaps halt your complete earning process and sell you a bitter story. As a result, learning solid forex trading tips now is a great investment of your time and energy.
Forex trading requires patience, courage, and tenacity, but only for a short period of time. Once these values, as well as your mastery of trading tips, strategies, and risk management, have been tested, your forex trading experience will rain on you with the rewards for your sacrifice and commitment.
You put in hours and months of hard hard work and dedication, then reap the fruits of your labour by learning the tips, strategies, and values you’ve developed.
A bachelor’s degree in finance, accounting, or business is normally required, as well as problem-solving and analytical skills and an understanding of financial markets and instruments, particularly forex. Previous brokerage experience may also be required.