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10 Lessons I've Learned about Forex Trading

I've been trading Forex for almost 15 years. I love it and wouldn't do anything else.


What are ten things I've learned along the way? Which advice would I give new traders? If I could only give ten tips, what would they be?


 
Top Forex Trading Tips

Lesson #1 - Choose the Right Broker


Having a reliable Forex broker who is trustworthy and provides a positive trading experience is crucial.


Many traders choose their broker based on leverage or through false advertising promising significant returns. Unfortunately, many traders open trading accounts with illegitimate (scam) brokers. You can learn more about this on my Scam Forex Brokers page.


The first rule for choosing a broker (or any financial investment, for that matter) is regulation. Ensure your broker is well-regulated.


Strong regulation helps to ensure the broker is legitimate, your funds are secure, and you will have a safe and reliable trading experience. Well-regulated brokers are the best option by far.


The best financial regulators are in the UK, the US, and Australia. Here is a list of the brokers I use:


CMC Markets (London, UK). Most of my trading funds are held with this broker. The best range of markets.

IG Group (London, UK). Spread betting and CFD trading experts.

Darwinex (London, UK). Great for copy trading and prop firm capital through their Darwin feature.

Hargreaves and Lansdown (London, UK). I use this broker for stock and ETF trading.

IC Markets (Sydney, Australia). This broker is not as regulated, but I have used them for over a decade with no issues whatsoever. They also offer high leverage and the tightest spreads if this interests you.


Lesson #2 - Trading Derivatives doesn't matter


When I started trading, there was a lot of negative hype about trading Forex through CFDs. Most people didn't trust it, perhaps because they traded with unregulated brokers!


CFD trading is widely accepted as the best way for retail traders to trade Forex nowadays. From my experience, trading Forex through an institutional broker, as CFDs, as options or even spread betting doesn't matter. I know of some very successful traders with large trading accounts who still choose to trade Forex using spread betting.


If you are using a well-regulated broker, it is purely a matter of personal preference how you choose to access the markets. I use both CFDs and spread bets. Both are great products, and I highly recommend them.


Lesson #3 - Longer-term Trading is best


Day trading is flashy, promising excitement and instant returns. However, nearly all Forex day traders lose money and find the experience frustrating and discouraging. Day trading is the ultimate get-rick-quick gimmick.


Focus on trading longer-term. Swing trading or Forex investing is more rewarding in several ways:


  • It is more profitable. You'll see your losses are smaller and your profits come easier.

  • It provides a higher win rate. Higher time frames are less random and can help to increase your win rate.

  • It is less emotional. You will experience fewer negative trading emotions when you swing trade.

  • You'll have a better lifestyle. Day trading requires desk commitment. However, swing trading allows greater flexibility.

  • You can still work or study. Most traders have other commitments - usually family, work, or education. Swing trading makes allowances for this and ensures you can pursue other things.


Lesson #4 - Use Fundamental Analysis


Most traders don't like using fundamental analysis. They think it's hard to understand or believe it will take away from technical analysis. Both of these beliefs are false.


Fundamental analysis is just as simple to understand and implement as technical analysis. You can start by taking my free fundamental analysis basics course.


Despite my love and commitment to fundamental analysis, I love technical analysis and study price charts daily. The key is to use both. You'll be a more profitable and well-rounded trader for doing so.


Lesson #5 - Look for the Best Trading Opportunities


Don't limit yourself to the major Forex pairs (AUDUSD, EURUSD, GBPUSD, USDCAD, USDCHF, USDJPY). Instead, track various currency pairs, including currency crosses and exotic pairs. This will not only provide more trading opportunities but also allow you to find the best ones.


My most extensive returns over the last few years have indeed been shorting the yen against the US dollar (USDJPY). However, I have also had great trades on EURJPY, GBPJPY, CADNOK, EURNOK, and GBPCHF.


 



 

Lesson #6 - Seek for Long-Term Growth


Focus on long-term profits. Evaluate your trading performance by quarter and year, not by day, week, or month. Doing so will have several benefits:


  • You'll have less trading pressure. Ease the pressure on yourself by having longer-term goals and plans. Trying to double your account this week will put more strain on you than trying to double your account this year.

  • You'll be less emotional. Having less pressure means less emotions. It also means you'll take fewer risks.

  • You'll be trading more like a professional. Focusing on the longer term makes you a more realistic and professional trader. Nearly all funds and professional traders track their performance yearly.


Having a long-term perspective will still make you rich. It is more likely to make you rich than trying to flip an account each week!


Lesson #7 - I Always Regret Trading my Emotions


The emotional challenges of trading are real. I face them even after 15 years of trading!


Every trade I have taken based on my emotions has resulted in loss and regret. Don't do it.


I have a page dedicated to reducing Forex trading emotions.


 

"Trading your emotions may lead to short-term gains, but it will always result in long-term failure"


Trading Emotions
 

Lesson #8 - Place Limit and Stop Orders, don't Enter at Market


One of the best ways to reduce losing trades is to place orders rather than buying or selling at the current market price.


Most of my trades have a trigger (entry signal), usually a price action setup or a break of support or resistance. Placing an order above or below these entry signals has saved me from countless losing trades, as the order acts as a final confirmation - the price must move in your desired direction before the trade is entered.


I suggest you do the same when closing positions - place stops and take profits rather than closing positions with an instant execution.


Lesson #9 - Carry Trading is Rewarding


I am not suggesting you use a carry trading strategy, but taking trades with a positive swap rate has benefits. These include:


  • You get paid to do nothing. I am currently holding several positions which pay me positive interest daily. I literally do nothing. The broker pays me to hold these positions. With leverage, some positions have resulted in significant returns from the swap rate alone.

  • You'll find it easier to keep positions open for longer. A positive carry trade will incentivise you to hold winners for longer, which is a key to successful trading. You will also find a slight reduction in trading emotions.


You can see a list of current global interest rates here: https://tradingeconomics.com/country-list/interest-rate


Lesson #10 - Enjoyment (or a lack of it) is the best Gauge


I understand trading is about making money. This is the number one reason why we trade. However, we likely did it when we first started trading because we loved it. Forex was exciting and engaging. Can you say you still enjoy it now?


If you don't, something is wrong. Perhaps you are risking too much, over-trading, or have unrealistic expectations.


Gauge your trading by how you are feeling. If you are not calm and enjoying the experience, something is wrong.


Bonus Lesson - Catching a Trend is Key


Letting winners run is crucial if you want to be a profitable Forex trader. The best way to do this is to catch a trend.


Most losing traders close winner positions too early. Learn to keep these positions open and have a strategy for following the trend.


 

I wish you all the best with your trading.

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