4 Capital-Saving Forex Tips For New Currency Traders

If you’re new to currency trading, there’s a good chance you have a headache right now. There’s so much information out there. So many ways to trade, so many news reports, and so many opinions. It’s easy to get paralyzed by all the information and it’s real easy to be misled.

I’m going to give you 4 tips to help ease you into currency trading. It’s basically what I did at first and it helped a lot.

Tip One: Reduce Indicators

I see some currency traders using charts that look like the traffic patterns of the Southern California highway system during rush hour. They are an absolute mess. Who knows, maybe there’s a method to that madness.

For the newer currency trader, I believe you need to limit yourself to a few indicators at most. Go ahead and decide these for yourself, but I used the 10, 50 and 200 EMA (exponential moving average) when I started and I added RSI too. That was it. I’ve since changed, but out the gate those helped me identify trends.

Tip Two: Two Charts Only

There’s so much chatter about what timeframe to look at that newer traders usually get very confused. Most end up posting to forums asking for “the best chart.” Give it enough time and there will eventually be at least one answer for each chart option.

I remember when I started currency trading. I was wondering why the daily chart showed a strong downward trend, the 240-minute chart showed sideways action, the 60-minute chart showed a slight downtrend, the 15-minute chart showed an uptrend and the other charts were all over the place. You should try to avoid this.

When you’re just starting, you want to learn to identify trends in the broader sense and go with those trends. As you grow you’ll press in a little more, but too many charts can lead to you getting the wrong message.

The daily chart will be your main chart. When you look at the daily chart, you should see if the currency pair you’ve chosen is going up or down. If it’s going sideways, move to a different currency pair. You want to trade currency pairs with movement so easily defined that a child could tell you if it’s going up or down.

Finally, you will want to look at the 240-minute (4 hour) chart. This will give you an idea of the more immediate future and show you possible entry points.

Ignore all other charts until you get a handle on currency trading. It might take you a day, week, month or year to reach this point. Don’t rush.

Tip Three: Only Go With The Trend

Let me say this again: only go with the trend. In other words, if you look at your currency pair and see it’s going up, you are only allowed to buy. If it’s going down, you’re only allowed to sell.

If you don’t like this, don’t make the trade. The goal here is to get you going with the flow and also to break you of the psychological handicap of bucking the trend that’s present in most people. The Forex market loves to trend. Just because something is going up already doesn’t mean it can’t keep going up for hours, days, weeks or months.

Let’s do a test. Look at this chart. Is it going up or down?

I hope you said down. If so, you’ve won the grand prize of being allowed to read on.

Tip Four: No Day Trading Allowed

Overtrading will kill you faster than you can say “gap.” Unfortunately, trading constantly seems to be a common trait with many Forex traders.

I actually did this when I started. Even though I was a day trading and swing trading stocks for awhile, I still needed to relax and follow a “fewer trades” policy. I had some great days turned into so-so days due to overtrading—and then I learned my lesson.

You don’t need to trade all the time to profit in the Forex arena. When you’re just starting out it’s more important than ever to limit your trades.

With this in mind, try to limit yourself to a trade a day max. In other words, look to jump into a trend and ride it out. Remember to use stop-loss triggers to keep a trade from going too bad. And if a trade goes against you, just get out and analyze the trade so you can see why you were wrong and if you can change something for the future. Don’t feel like you have to get right back into the FX market. It will be there when you’re ready again.