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Tips for UK Forex Traders
So many new UK traders come into forex trading with an expectation of quickly becoming a millionaire. They soon learn that making money from forex trading isn’t as simple as just placing trades and collecting profits. They need some forex trading tips that can help them to succeed in the market.
If they get these useful tips and combine them with a good trading education and hard work there’s a chance that they can become successful as a forex trader. If this sounds like something, you’d like keep reading. This article will give you 9 forex trading tips that can help you improve your forex trading results.
We focus mostly on short-term trading here, because this is the most popular trading style. Many new traders from UK look to this type of trading where positions are held for a short time, usually less than a day.
This type of trading has become so popular because it is also considered as a way to deliver quick profits to a trader’s account. Understanding the dangers of short-term trading are also important. Short-term forex trading is exposed to volatility, and poor risk management can make this style of trading very dangerous.
Short-term forex trades typically make far less on each trade, but the higher frequency of trades makes up for this, and at the end of the day this trading style can deliver a good number of pips.
You will choose between short-term forex trading and long-term forex trading at some point in your trading career. Whether you stay with the short-term trading or switch to long term trading will be determined by your own trading psychology and style.
The following forex trading tips are meant to help you control your risk and manage your money effectively. Hopefully these 9 forex trading tips will help you become a better trader.
Forex Tip 1 – Understand your own personality and trading style
It might seem like obvious advice, but knowing your own personality and trading style is much easier said than done. We all have our own personality and goals, and we all have our own unique approach to the markets and trading. You need to know what your personality and approach is if you want to be a successful forex trader.
While some UK traders are most comfortable with small, safe positions, others love to swing for the fences with the riskiest, but potentially most profitable, trades. Which way is yours?
Also think about whether you like to be a follower who might work well with a trend following approach. Or maybe you like to go against the crowd and are always looking for a different way to approach things. This personality type often does well as a contrarian trader.
You don’t need to figure this all out right now, but you should keep it in mind.
Forex Tip 2 – Choose your Best Broker
You already know there are literally hundreds of brokers you can choose from, and each one is different in some ways. Some focus on specific asset types, while others may work best for broad approach. There are brokers for beginner traders and others for pro traders.
It’s true each broker is different, and AvaTrade UK has its own style as well. We hope to be your best broker, no matter what your needs are for trading forex markets. Open a demo account and give us a try today.
Forex Tip 3 – Learn and Practice Several Trading Strategies
If you want to make forex trading a career you should want to become an expert forex trader. That means learning and mastering multiple professional trading strategies. Just as a lawyer will have a different approach to traffic court versus civil court, so you need to have a different approach to different market conditions.
Having several trading strategies at your disposal gives you a broader look and understanding of the market. It also gives you the option of having the best trading strategy no matter how market conditions change.
Forex Tip 4 – Start Broad and Finish Narrow
Always begin your analysis from the higher timeframes. Looking at the weekly and daily chart will give you the big picture and long-term trends. From there you can drill down to the 4-hour, 1-hour, or shorter time frames.
Once you know the long-term trend you can use the short-term charts to find short-term opportunities in the same direction as the broader market trends.
There’s truth to the old saying that “The trend is your friend.”
Forex Tip 5 – Check Asset Correlations
Correlations in assets can help you identify good trades when used to your advantage. A correlation is a statistical relationship between two assets. For example, the Canadian dollar tends to be positively correlated with oil prices. That means they often move together. A negative correlation means the assets tend to move in opposite directions. A good example of this is the U.S. dollar and gold.
Knowing about these correlations, understanding their impact on your trading, and using them to your advantage can give you the edge you need to become more successful as a trader.
Forex Tip 6 – Always Have a Trading Plan
There’s a saying that goes “Fail to plan, plan to fail” and it is appropriate for forex traders from UK to keep it in mind.
Your trading plan is what will tell you when to enter and exit your position, the profit target, how much risk you’ll be willing to accept, and everything else regarding your trade. It will keep you from getting too fearful or greedy, and should prevent emotional decision making.
In all honesty having a trading plan is one of the most important tips, and it should probably be at the top of this list. And the key is not just to have a plan, but to follow it religiously, and to take the time to analyse how well it performs so you know when changes might be needed.
Forex Tip 7 – Protect your Capital by Managing your Risk
Protecting your capital is what will keep you in the trading game when others have been thrown out by their own careless risk taking behaviour. Remember that the market will always be there for another day and another trade, and you want to be sure you have capital to take advantage of that in your forex trading account.
This means always calculating your risk on any trade, and knowing when to enter and when to take a day off. Volatility is good, but not if it increases your risk to the point that you blow up your account. Also be sure to always use stop losses to protect from unforeseen moves.
Forex Tip 8 – Trade with the Facts
You might be thinking this is basic, but too many UK traders fall into the trap of trading on emotions and hunches rather than facts. Always trade what the market shows, not what you hope to see. Wait for your trade setup and avoid trading based on emotions.
Two things you can do to help ensure you are trading with facts and not emotions is to have a clear trading plan that you’re following at all times, and to keep a detailed journal of your trades.
Forex Tip 9 – Never Stop Learning
The forex market is one of the most complex financial systems ever created, and no one will ever know all there is to know about it, especially since market conditions are always changing. This makes it crucial for you to always be learning.
Because the forex market is ever-changing you need to understand that what worked yesterday won’t necessarily work today. And when your strategy stops working it would be good to have the knowledge to know why it’s stopped working, and how to fix it.
Always look to try new strategies, find new ways to research the market, master your technical tools and your fundamental analysis strategies.
Last of all, keep an eye on the evolving technologies like auto-trading, back-testing software, and new technical trading indicators. Each might have a place in your future trading plans.
As you probably already know most people who start trading forex end up losing money. Few UK traders make it past 6 months, and even fewer get to the 2 year or 4 year mark.
One of the reasons this is true is that UK forex traders, who tend to be pretty aggressive by nature, tend to get overconfident after several winning trades in a row. This leads them to abandon their risk management and their trading plans, and eventually they get burned badly.
This is why you always need to stay on top of your trades and your emotions. Take the market seriously, understand yourself, and use our 9 forex trading tips to help you become the most successful trader you can be.
We know you can achieve the success you desire.