1. The trend is your friend: To trade profitably in Forex, you will need to have a trading strategy in place. Nonetheless, the effectiveness of your trading strategy also needs to take into account the market trend. You must therefore observe which direction the market is moving in - whether it is in an upswing or downswing - and trade accordingly.
2. Avoid emotional decisions: Do not let greed cause you to add many positions while winning, and do not try to exact revenge after losing. It is best to form a pre-defined trading plan in order to set your goals, since overtrading can rattle your money management and drastically increase risks.
3. Trade pairs, not currencies:Always trade while bearing in mind that all currencies are paired. This means you should consider both sides of the currency pair when making trading decisions. You need to be aware of the impact the market has on both currencies in the pair and not view only one particular currency as important.
4. Only trade with money you can lose: Be sure to trade only with money you can afford to lose. The Forex market is volatile; a successful trader is able to survive under unfavorable market conditions, while an unsuccessful trader will lose his account after suffering a series of unprofitable trades.
5. Learn from experienced traders: Forex forums are excellent places in which to pick up tips about trading strategies. It would likely prove beneficial to you to join a number of Forex forums and actively participate in discussions.
6. Set a risk level that suits your trading style: As tempting as it might be to leverage your trades to the maximum in order to gain maximum profitability, one must never forget that leveraging also exponentially increases the risks of losses. You should, therefore, be cautious in heavily leveraging your trades, despite your appetite for quick profits.
7. Let your profits run: To gain as much as possible from the market, you should try to let your profits run for as long as possible. This will, of course, require you to have a good exit strategy so as to avoid turning a winning trade into a losing one. As such, you should practice defensive trading by opening two or more market positions. This allows you to close one position earlier and then let the other market positions run in order to gain higher profits.
8. Cut your losses: If one of your trades becomes unprofitable, it is more beneficial in the long run for you to cut your losses rather than letting the position run in the hope that it will reverse and turn the losses into profits. Therefore, stop loss orders should not be placed too far, which could result in massive losses.
9. Search for the optimum stop loss point: Forex traders who fear making losses often place their stop loss point too close to their entry point. Because the volatility of the Forex market, the stop loss orders are sometimes set at amounts too small to accommodate price spikes in the market. Because of this, they are unable to ride out fluctuations and exit the market too early.
10. When in doubt, do not trade: Although not trading is normally regarded as inaction, it can also be considered a market position that you are taking. It is preferable to preserve your trading capital for better conditions than to take risks when you are in doubt about the market.
11. Educate yourself about Forex terminology: This terminology exists for the specific purpose of avoiding confusion while trading in the market. Therefore, you should make an effort to learn all the appropriate terminology used in Forex trading so as to avoid becoming confused. There are plenty of web resources that can help you learn about Forex terminology.
12. Select an appropriate time frame: This means you have to choose a time frame with which you are comfortable and that allows you adequate time to study the market, as well as deal with the nitty-gritty details of trading. Some traders are impatient and prefer a shorter timeframe in which to trade, in order to feel the action. Others prefer to trade in a more relaxed manner, and therefore choose longer timeframes.
13. Keep it simple: An overload of information can at times create a misleading picture about the market. To prevent yourself from gaining a false impression, it is wise to keep your trading strategy simple and concise.
14. Study the risk / reward ratio before opening a position: You should always consider how much of your risk capital you can afford to lose before you enter into a trade. In addition, you should consider how much you will profit by entering into a particular trade. In short, you have to ask yourself: Is this trade worth it?
15. Mark the economic calendar: Fluctuations in currency prices occur when important economic news is announced. Therefore, you should always take note of the time and date of when such announcements are slated to be made.