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The FX market

If you want to learn about the forex market and what is involved in FX trading then this article will guide you through the key areas that you need to be aware of.

Let’s start with what makes the FX market so different from other financial markets.

How to open USGFX’s Forex trading account?

1. Liquidity

The foreign exchange market is the largest financial market in the world with a daily turnover of more than $5 trillion.

Now apart from being a really cool statistic, the sheer massive scope of the Forex market is also one of its biggest advantages.

The enormous volume of daily trades makes it the most liquid market in the world, which basically means that under normal market conditions you can buy and sell currency as you please.

You can never be in a jam for currency to buy or stuck with a currency that you cannot unload.

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2. Transparency

Market transparency is much greater in Forex than in other markets such as the stock market, which means it is easier to analyze the inner workings of the FX market and figure out what is driving it.

For example, economic reports and news announcements that drive a country’s economic policy are widely available and accessible for anyone interested.

Whereas a publically listed company’s accounting statements are much harder to obtain.

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3. Accessibility

It’s no wonder that the Forex market has a trading volume of more than 5 trillion a day – all anyone needs to take part in the action is a computer, or even only a mobile, with an internet connection.

24 hour Market The Forex market is open 24 hours a day so that you can be right there trading whenever you hear a financial scoop.

No need to bite your fingernails waiting for the opening bell.

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4. Select Focus

Unlike the stock market, a smaller market with tens of thousands of stocks to choose from and with low trading volume in most stocks, the Forex market revolves around more or less eight major currencies that make 75% of the trading volumes.

A narrow choice means no room for confusion, so even though the market is huge, it’s quite easy to get a clear picture of what’s happening.

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5. The Market cannot be cornered

The colossal size of the Forex market also makes sure that no one can corner the market.

Even banks do not have enough pull to really control the market for a long period of time, which makes it a great place for the little guy to make a move.

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The FX advantage

It doesn’t take a financial genius to figure out that the biggest attraction of any market, or any financial venture for that matter, is the opportunity for profit.

In the Forex market, profitability is expressed in a number of ways.

First of all, just to set the record straight, you do not have to be a millionaire to trade Forex.

Unlike most financial markets, the Forex market allows you to start trading with a relatively low initial capital.

At USGFX, you can start trading Forex with as little as $100.

Right about now you’re probably asking yourself: “what chance do I have of profiting with such a low initial investment?” The Forex market does not require large initial investments because it allows you to use leveraged trading.

Leveraged trading lets you open positions for tens of thousands of dollars while investing sums as small as $100.

This means that Forex trading has the profit (and loss) potential of tens and even hundreds of percent a day.

What is also unique about the Forex market is that any sort of movement is an opportunity to trade.

Whether a currency is crashing or soaring, there is always room for speculation, since you always have the option of buying or selling the currency of your choice.

Unlike the stock market, you are not limited to speculating on rising stocks only, and therefore a falling market is just as good for business as a rising market.

Having said all that, it is important to remember that as profitable as the Forex market is, it still carries all the risks involved with financial trading.

You should always be aware of the risk and never risk money that you cannot afford to lose.

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The importance of a good FX education

USGFX TradersClub Coaching Program

Good education and knowledge is the key to your trading success.

It is absolutely vital that you have a solid understanding of the Forex market and of the ins and out of FX trading before you start trading.

Reading this book is an excellent step to gaining the right knowledge or consolidating your existing knowledge but it will do your trading huge favors if you follow up with a structured forex trading course.

Some forex brokers do offer some great courses so check with your broker if they have a forex trading educational course that is suitable for you.

USGFX offers a structured and professional educational course, called the TradersClub Coaching Program.

It is a professional online educational course delivered in the form of two live and interactive webinars per week and made available to USGFX Standard Account clients free of charge.

It is perfect for traders who are just starting out in the FX markets and want to learn techniques and strategies that will help them make better trading decisions.

Learn more about the USGFX TradersClub Coaching Program here.

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Understanding FX Pair Price Movement

Trading Forex is an exciting business.

The market is always on the move, and every tiny shift in currency rates can mean profits and losses of hundreds and even thousands of dollars.

Let’s demonstrate how that can happen: In general, the eight most traded currencies on the Forex market are below.

This is also known as the “Majors”: Forex trading is always done in pairs, since any trade involves the simultaneous buying of a currency and selling of another currency.

The trading revolves around 14 main currency pairs.

These pairs are:

  • EUR/USD
  • GBP/USD
  • USD/JPY
  • USD/CHF
  • USD/CAD
  • AUD/USD
  • NZD/USD
  • EUR/JPY
  • EUR/GBP
  • EUR/CHF
  • GBP/JPY
  • GBP/CHF
  • CHF/JPY
  • EUR/CAD

When buying or selling a currency pair, each pair has its own Bid/Ask rate, for example:

This means you could either: Sell the pair at the Bid rate of 0.7069 – or – Buy the pair at the Ask rate of 0.7071 .

OK, but where’s the opportunity for profit?

The currency pair rates are volatile and constantly changing.

One way to profit is by buying a pair, then selling it at a higher rate.

The second way is by selling the pair, then buying it at a lower rate.

As your positions become profitable, you will see your account equity increase in real-time in your USGFX MT4 trading account.

When you close a profitable position, the gains will be added to your account balance as well.

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What is a PIP and how you calculate your trade value?

The unit of measurement to express the change in value between two currencies is called a “PIP.” For example if the EUR/USD moves from 1.2250 to 1.2251, that .0001 USD rise in value is ONE PIP.

A pip is usually the fourth decimal place of a quotation.

Most pairs go out to 4 decimal places, but there are some exceptions like Japanese Yen pairs (they go out to two decimal places).

Some brokers (including USGFX) use 5 decimal places, also known as fractional pip or a point.

For example: EUR/USD – 1.2250 USD/JPY – 120.05

So now that we have defined what a PIP is, the next question is obviously how we calculate the value of 1 PIP and therefore the profit or loss of a trade.

It’s pretty easy to calculate the value of a PIP.

Here’s the formula you need to use:

SIZE OF POSITION divided by 10,000 = Value of 1 PIP

So let’s put it into an example.

In a trade that is worth 1 lot (i.e. 100,000 units of the primary currency), each PIP is worth 10 units of the secondary currency.

For example: 100,000/10,000 = 10 units.

So if you bought 1 lot (100,000) of AUD/USD at 0.6900 and you sold at 0.7000 and you made 100 PIPs then your profit would be:

100 PIPS multiply by 10 units (in this case USD) =$1,000

If you had traded 10 lots (10 times bigger trade), the same 100 PIP gain would now be worth $10,000 USD: 1,000,000/10,000= 100 units.

100 pips * 100 units (in this case USD) =$10,000

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What is the Spread?

The spread is the difference between the buy (also called bid) price and the sell (also called ask) price.

Two prices are given for a currency pair.

The spread represents the difference between what the broker gives to buy from a trader, and what the market broker takes to sell to a trader, basically the spread is the traders cost to enter the trade that is paid to the broker.

If a trader buys any currency and immediately sells it – and no change in the exchange rate has happened – the trader will lose money.

The reason for this is that the bid price is always lower than the ask price.

For example, the EUR/USD bid/ask currency rates at your bank may be 1.2015/1.3015.

This represents a spread of 1000 pips.

This spread is very high compared to the bid/ask currency rates for online Forex investors, such as 1.2015/1.2020 – a spread of 5 pips.

In general, smaller spreads are better for Forex investors because a smaller movement in exchange rates lets them profit from a trade more easily.

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What is Margin?

Simply put, Margin is a courtesy deposit needed to access trading in forex.

Your deposit is also known as an initial margin or initial deposit.

Say, you have $1000 in your account and your leverage is 100:1.

This means that you can trade up to $100,000 worth of currencies.

Your account balance will be ‘earmarked and locked for every transaction that you make leading to the $100,000 mark.

So if you hold a $10,000 open position, $100 of your account balance is tied up as a security to your broker.

This is known as a maintenance margin.

You can now trade the remaining $90,000 leverage inclusive of your $900 balance.

Similarly, once you close your position, your ‘earmarked’ money will be free for use again.

What is Forex Leverage?

What is Leverage?

Leverage is a very important part of Forex trading, and it is critical that you know exactly how it works and how to use it.

It is the term Forex traders use to refer to the ratio of invested amount relative to the trade’s actual value or in other words increasing the trader buying power.

Forex brokers usually provide their clients with the option to trade on borrowed capital, so that traders do not have to invest tens of thousands of dollars for the chance to make any real profit.

When you trade at a leverage of 100:1 (or “100 to 1”), it means that for every $1 that you invest in the market, the broker invests $100 for you.

As a result, you can control an amount of $50,000 by investing $500.USGFX provides traders with the opportunity of trading at up to 500:1 leverage.

It probably will not surprise you when we say that with greater opportunity for profit comes greater risk.

Just like slight fluctuations in currency rates can make you significant amounts of money, it can also cause you to lose your money very quickly.

The higher the leverage, the larger the profit that you stand to make and the quicker you might lose your investment.

Leverage of 400:1 can make you more money than a leverage of 100:1, but it also puts your initial investment at more risk.

The Ratio between Lot Size, Trade Size and Leverage

1 lot size for trade at USGFX is $100,000, so when you trade 0.2 Lots it actually means you traded $20,000.

The advantage of trading with Leverage is that your profit potential is virtually infinite.

At USGFX, any losses are limited to the amount of your initial deposit.

This is also called Negative Balance Protection and not all brokers will offer this so make sure you double check if your chosen broker offers this or not.

Once the rate drops below the rate covered by your investment – that is, the “Free Margin” in MetaTrader reaches zero – the trade is automatically closed.

Remember, Leverage can be a trader’s best friend when used carefully, and his worst enemy when used recklessly.

It is a great tool for increasing profits, in fact, private traders rarely trade without it.

But you should always keep in mind that the higher the leverage is, the higher the risk level is.

Now that you are equipped with most of the basic tools, you can make your first trade!

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What are CFDs?

CFDs (Contracts for Difference) are derivative trading instruments providing opportunities to trade on the price movement of various financial assets such as equity indexes and commodity futures.

CFDs offer a simple method to speculate on different markets without ever actually owning the underlying asset on which the contract is based.

Traders find CFDs to be a popular option to diversify their trading into different global markets.

To trade indices, commodities and currencies on the same platform, join USGFX and get started with a practice account.

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Introduction to Technical Analysis

There are 2 main methods to analyze the FX market.

One is called Fundamental Analysis and the second and most commonly used is called

  1. Technical Analysis
    • There are many different methods and tools utilized in technical analysis, but they all rely on the same principles – that historical price patterns and price trends exist in the market and that they can be identified and turned into profit opportunities.
    • The pure technical analyst is only concerned with price movements, NOT the reasons behind the price movements (i.e. Fundamental supply and demand).
  2. Prices Move in Trends
    • Prices can move in three directions – they can move up, down or sideways.
    • A trend is a term used to describe the persistence of price movement in one direction over time.
    • As long as it’s not proven otherwise, the current trend is still active.

What is Technical Market Analysis?

Keep an eye out for the trend

Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future.

Although this may seem pretty basic, being able to identify when a pair is in a trend and when it isn’t will help you to increase your chances to profit consistently in the Forex market.

When you can identify a trend, you can estimate what direction the rate of a currency pair is going to go in.

You should exploit the direction of the trend you identify by placing a trade in that direction.

If it is an uptrend, meaning that the rate is increasing, buying the currency pair will give you a better probability for profit.

If it is in a downtrend, meaning that the rate is decreasing, selling the currency pair will give you a better chance of making money.

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How do I identify a trend? What are the characteristics of a trend?

The simplest way to identify a trend is through the distinct patterns that the price forms.

These can tell you if the market is moving in an uptrend or downtrend and the technical analysis charts on MT4 play a vital role here.
Main trends are characterized by three phases of transition:

1. Scale in Stage

Initial stage where only professional and experienced traders and investors are entering the market, usually on the basis of specific information.

2. The Massive Participation Stage

The Massive Participation Stage represents the second and longest stage, with all the semi-professionals traders starting first followed by the mum and dad investors.

This is also the stage where the trend takes the maximum acceleration.

3. Distribution Phase

Distribution Phase represents the third stage in which the “euphoria” permeates into the mass media channels and controls the general public, who enter into the market intensively.

This is also the stage where those professional (Scale in Stage) traders close their positions and exit the market.

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Recognizing Trends

The easiest way to spot trends is via trend lines, drawn below price lows or above price highs.

The MetaTrader 4 Platform allows users to effortlessly trace trends using Equidistant Channels.

recognizing trend technical tools

To activate, Simply press the Equidistant Channel button and drag your cursor from the lowest point to the highest point.

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Moving Averages

Another effective method to spotting trends is a moving average.

To add a moving average to the chart: in the top toolbar, select “Insert”, “Indicators”, “Moving Average”.

indicator trend

In the “Moving Average” window, select the desired period, color and style.

To activate press “OK”.

moving average parameters

MT4 – Technical (Trend and Oscillator) Indicators Manual

Moving Average

Here is a chart showing a moving average with a relatively low Example period of only 10 units.

moving average example

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Moving Average Strategy

Many traders use multiple averages to identify strong trends.

To use this strategy, add 3 moving averages to your chart, the first with Period 10, the second with period 20, and the third with 30.

moving average strategy

After you add the 3 moving averages, you will see a chart similar to the one shown below.

If the lines are close to each other or “criss-cross” each other – it means that it is NOT a good time to enter the market.

criss cross

When the lines “spread out”, it means that there is a strong trend to follow, and you should enter the market.

moving average line spreading out

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Support and Resistance

Trend lines will help you easily spot support and resistance levels.

Support and resistance describe the price levels where markets repeatedly rise or fall and then reverse.

This phenomenon reflects basic supply and demand, as well as human psychology.

support and resistance

support and resistance buy and sell

As a general strategy, it is best to trade with the trend rather than against it, meaning that if the general trend of the market is up, you should be very cautious about taking any positions that rely on the trend going in the opposite direction.

The trend spotting strategy assumes that the present direction of the price rate will continue into the future.

It can be used in three main time-frames: short, intermediate, and long-term, with the trends being different for each.

For example, here is a possible scenario in the Forex market:

Over the last 12 months, the trend for EUR/USD is an uptrend, over the last 30 days the trend is a downtrend, and over the last 24 Hours (intra-day) the trend is an uptrend.

Regardless of the chosen time frame, traders will remain in their position until they believe the trend has reversed.

So the goal is to spot a trend that you believe in and trade according to it.

Needless to say, you will need to monitor the trade, in case you were mistaken and the trend vanishes or reverses.

Then it is time to cut your losses by closing the losing trade or by reversing -closing the trade and opening a following, opposite trade.

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Placing a trade

If you have come this far it probably means you are ready to try trading.

If you do not already have an USGFX Demo Account, get one now for free here.

You will also get a free 30-day trial of our exclusive Trading Central services, which includes award-winning technical analysis reports delivered straight to your inbox, twice daily, to help you make better trading decisions.

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Here is a to-do list of actions to be taken as you place a trade:

  • Identify the pair to buy or sell.
  • Decide on the initial trade size (in Lots)
  • Consider applying Stops or Limits (covered in the next chapter)
  • Open the trade

Let’s say that after spending some quality time looking at the charts of several currencies, you’ve concluded that EUR/USD is trending up.

Now, what is the reasonable decision based on this conclusion?

Clearly, you can profit by buying EUR/USD (buying EUR/selling USD)

Reminder – buying is done at the “Ask” price, while selling is done at the “Bid” price.

Imagine that you bought 1 lot of EUR/USD on your USGFX MT4 trading account.

The details of your trade are:

Margin used: $250
Transaction size: 1 lot or 100,000 Euros
Leverage: 400:1 (250*400=100,000)
EUR/USD (Ask): 1.3956

In plain English, what you have just done is bought 100,000 units of EUR/USD, which at that specific rate represents 1.3956 USD per 1 EUR, so the value is 139,560 USD, meaning you pay 139,560 USD to BUY 100,000 EUR.

Now, let’s assume that at the end of the day, or possibly even a few minutes later, the EUR/USD rate has risen to 1.4066.

You SELL those 100,000 EUR/USD Units at the new rate of 1.4066 so the value is 140,660 USD.

You received 140,660 USD for the 100,000 EUR you just sold,

So when you bought you paid 139,560 and when you sold you received 140,660, therefore 140,660-139,560= 1,100 USD, your profit is $1,100.

This means that this seemingly insignificant fluctuation in the rate allows you to cash in $1100 on an initial Used Margin or investment of only $250.

In other words, you just made a 440% profit on your investment, thanks to the movement in the exchange rate and the use of leverage

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Understanding the FX time zones

The Forex market is open 24 hours a day, but what are the best times to make a trade?

Even though the Forex market is open 24 hours a day with the exception of weekends, not all hours are as equally good for trading.

The reason that the Forex market is open 24 hours a day is that it is made up of different sessions around the globe that between them cover 24 hours.

The more markets that are active at the same time, the more trades are being executed, and the more action and volumes for you to cash in on.

Trading Sessions (“GMT” – Global Market Time):

forex time zones

Since the London session is the busiest out of the four sessions above, the best times for trading are 8AM-9AM (GMT) and 13PM-17PM (GMT), because that is when the London session overlaps with other sessions especially the U.S market.

Remember – even though you are able to trade 24 hours a day, it is better to plan your trading activity in order to catch the best action for a chance to maximize your profits and minimize your losses.

International Forex market sessions – Trading Volume and Characteristics

Risk Management and Rewards

Forex trading can be a risky business.

This chapter will explain the usage of Stop Loss (“Stop”) and Limit (Sometimes called “Take Profit”) orders.

These are used for managing your risks and rewards, realizing your profits, and minimizing your losses.

Professional trading is all about managing your risk and your trades.

By setting a Stop order you make sure that the value of your position does not drop below a certain level.

This way, you control the risk and the maximum amount that you are willing to lose on a trade, without having to monitor each trade around the clock.

Having some losing trades is inevitable for any trader.

One of the most critical keys to successful trading is to limit losses on these losing trades, using Stops and controlling the risk.

Limit orders, sometimes called “Take Profit” or “TIP” are similar to stop-loss orders, only referring to profits.

Limit orders ensure that once your trade reaches a certain level of profit, it will be closed and the profit locked-in.

For instance, imagine that you have opened a long (that is, you bought) EUR/USD trade at the rate of 1.3950.

After a few hours, the rate rises to 1.4050, but an hour later drops to 1.3900.

Without a Take Profit order, you might miss the rise in the rate, and end up with a loss on your hands.

If you had set a Take Profit order, the potential profit of the trade would have been realized, without you having to monitor the trade around the clock.

Remember, Stop Loss and Take Profit orders are very simple tools that can make the difference between a successful trading career and a big hole in your pocket.

Consider using these orders with every trade that you make.

As a general rule, a trader who risks a quarter (25%) of their investment portfolio on a single transaction, actually ensure the end of their trading road in the market.

Exposure of 2% – 5% of the investment portfolio on a single transaction is the recommended exposure to risk.

Risk management along these lines will maximize your chances of longevity in forex trading.

Exposure management can be applied on the basis of one of two rules:

Risk Haters- the rigid law 5/15 for Risk Management:

$ 10,000 account, Risk $ 500 at most on any single trade, Up to $ 1,500 in total risk.

Most amateurs in the market find it difficult to follow this rigid law because most of their accounts are small, the 5/15 Law shatters the dream to get rich quickly.

Risk Lovers – permissive law 10/30 for Risk Management: Risk up to 10% per trade, Total of up to 30%,

This law is for traders who start with small accounts to allow some leeway.

Basically, permissive law is considered the upper limit of exposure to risk and seek overtime to reduce the overall exposure.

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Money Management

Is there a secret to becoming a successful trader?

There is a method that all successful traders use, and it is not a secret.

It is called money management.

Money management is not some vague industry lingo – it simply means the knowledge and skill of managing your Forex trading account.

As simple as that may seem, it is the key to a long and successful trading career.

And yet it is often forgotten or neglected in the thrill of the trade.

We would like to take this opportunity to lay out some ground rules by which you can effectively manage your account.

Do not go looking for the Big Win; it will most likely result in a big loss.

Successful trading means consistent trading, where small wins amount to large long term profits.

Never assume that all your trades will be profitable, and plan on losses.

You should only risk a small percentage of your total account balance on each trade.

This simply minimizes your risk, so that even if you end up losing your entire investment on a trade, it does not have a critical effect on your account balance.

The recommended amount is 2% of your account balance per trade.

More aggressive traders go as high as 5%, but never higher than that.

It is a very important rule to keep, since the lower your account balance drops, the harder it is to rebuild it.

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Using Limit Orders

Learn to use the Stop and Limit orders effectively.

These orders protect your investment and realize your profits.

They are very simple tools that can make all the difference to your account balance.

Size of Trades

You are advised to open small trades, because, in the case of a losing trade, you can then open the opposite trade with a bigger investment or higher leverage, thus compensating for losses.

Use a free practice account to practice trading.

USGFX offers a full-featured demonstration version of a live trading account with a starting balance of virtual money.

Everything works exactly the same as in a live account, but no real funds are at risk.

We recommend using the practice account to get to know the platform and gain Forex trading experience.

Practice trading with a free USGFX Demo Account

And even after you have begun trading on a live account, a Practice Account is the perfect place to try out new trading strategies.

There is no point in risking your money to test out a possible theory, when you can do so with the same success minus the risk.

After seeing that your strategy is consistently successful in a Practice Account, you can try it out on a live account.

Remember – money management is very simple to master, but not as simple to keep up.

Once you have developed the money management system that works for you, make sure to stick with it and do not let your emotions get in the way of long term profit, even if it means absorbing short-term losses.

Now that you are equipped for trading, take your time practicing your trading skills.

When you are ready for real trading, go to USGFX Official Website to open a live account and start profiting from the Forex market.

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Traders’ Psychology

Having the correct mindset is absolutely imperative when it comes to trading.

In this section, we will look at the emotional journey of forex traders, and how understanding your emotions can help you make better trading decisions.

The emotional roller-coaster of trading

There is a rich and powerful journey of emotions that a forex trader goes through when trading.

This journey is inevitable.

If you’re a human being you will experience this it.

The reason why this is so important is because as FX traders, if we can understand and comprehend which events will trigger which emotions then we can minimise the influence that our emotions have on our trading.

1. Placing a trade

When novice traders place a trade, an emotional roller-coaster begins! Joy and intense excitement is experienced about the potential for profit and fear floods the mind about the potential for loss.

Hesitation is also experienced if the trader is unsure about trading or about the position.

These things can all happen at once or in sequence.

Psychological research has identified this common thought process.

Once a decision is made, whatever the subsequent result, people look for evidence that they have made the “right” decision after they have made it.

Their perception of the probability of the identified outcome increases after the decision has been made.

Once a trade is taken, novice traders often experience the decision as being the correct one.

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2. A winning trade

When a trade goes in the correct direction, novice traders experience a flush of excitement and joy.

They were right and they begin hallucinating what they can or will do with the money they will make from the trade.

They begin hoping and wishing for it to go higher.

The higher and faster it goes up, the more excitement they feel.

For more experienced or advanced traders through, the psychological journey is a little different.

At this stage of the trade, the advanced traders tend to fear that the trade could suddenly turn around and go in the opposite direction and thus they fear losing the profit they have.

As a result of this fear they usually pull out of the trade – leaving money on the table, which means they do not see the full profit potential of their position.

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3. A losing trade

Hopes are turned to ashes as a promising strategy is engulfed by a mean and menacing market.

The emotions generated by this event can range from a bit of annoyance at the trade not going the “correct “way, to feeling bamboozled, to complete unbelief at what just happened.

For the more experienced traders though, this phase of the trade usually induces a whole lot of hope.

Hope that the trade will bounce back and the market will correct itself and move in the “correct” direction.

It is this hope that is usually the main contributing factor in traders leaving a losing position open for far too long.

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4. It’s time to close the position

At the time to exit the trade, traders can be experiencing a mix of emotions.

If the trade went well they can be extremely exuberant and happy.

If they got out at a large loss, they can be filled with sadness and intense regret at staying in for so long.

Doubt and a loss in confidence are common when exiting at a large loss.

These emotions can induce fear in the mind of traders for their next trade and this could result in anxious trading, thus leaving money on the table.

In the case of a large win, feeling on top of the world and experiencing a sense of conquering the markets can take place.

These emotions can make traders feel very confident and perhaps a little cocky and this means that in future trades they are likely to take more risk, usually in the form of increasing their lot size.

Either way, it is important for traders to understand that their emotions have an influence on their trading and they should not allow emotions to impact their trading strategy.

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5. After the trade

Once a position is closed, a trader’s emotions will vary significantly depending on what the outcome was.

If the trade was a profitable one, traders are likely to feel confident and their joy and happiness will continue long after the trade is closed.

On the other hand, if the trade was a losing trade then feelings of regret and failure will ensue.

Regret is a very common post-trade emotion.

Traders often regret getting out if the trade goes on to higher prices.

Alternatively, they can regret not getting out earlier if an exit signal was there and they ignored it.

Advanced traders usually have an exit plan as part of their trading strategy and they know in advance when they will exit the trade.

Only when they receive their exit signal do they exit the trade and this is how it should be done.

Very rarely do traders perform a review of the trade, nor how well the trade was executed.

Yet these are vital considerations that support long term trading survival and success in FX trading and traders should certainly make a habit of doing this.

Keeping a log book to record the specifics of trade and also recording the emotions you experienced is also highly recommended in order to monitor yourself as a trader and become more advanced.

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6. Make your emotions your friend

Understanding your own personality and temperament and how you respond to certain events allows you to leverage your emotions and take control of the situation, rather than the situation taking control of you.

The key here is to develop a trading strategy that is compatible with your personality, rather than trying to modify your personality to fit a particular trading strategy.

When you appreciate that you may experience different emotions at different stages of a trade, you will be able to notice when they are beginning and not allow them to cloud your judgment.

Noticing your emotions can also serve as a trigger to focus you back on your actual trading and less on your emotions.

As you get more and more experienced as an FX trader, and you understand which emotions are triggered and at which points of a trade, you can actually start to use your emotions to help you become a better trader and thus potentially make your trading more profitable.

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A Trader’s Mission and Goals

It is the mission of the trader to become a long-term, financially successful trader.

This can be achieved when the trader has an effective trading strategy and develops the discipline and skillset to stick to it.

A trader must commit to live by three disciplines to become a successful trader.

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3 Disciplines of Successful Traders

  1. A trader must have a trading strategy that is suitable to their personality and execute that strategy with strict discipline. Success depends on maintaining the discipline to TRADE THAT PLAN!
  2. A trader must be committed to continuing education. Study technical analysis and the psychology of successful trading. A trader must make logical decisions, void of emotions, while trading. Learn to trade in control!
  3. A trader must map out a sensible risk management plan to ensure a good Return on Investment. Trade no more than 30% of a Margin Account and expose no more than 10% of that account on any single trade.

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Levels of Traders

Level One Beginner Trader – Studies and practices trades for a minimum of one month with a demo account, gaining the experience required to establish a track record of profitable performance.

Level Two Advanced Beginner – Trades one or two lots with real money, learning to overcome emotions and at the same time, establishes a track record of making money.

Level Three Competent Trader – Trades with control over their emotional distractions. Utilizes proper equity management and achieves a positive financial return.

Level Four Proficient Trader – Trades with confidence, education and experience. Achieves positive financial returns.

Level Five Expert Trader – Instinctively executes profitable trades without emotion.

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The USGFX advantage – giving yourself the best chance to succeed

USGFX is a premium Australian forex broker, enabling FX traders in Australia and around the world to trade currencies and CFDs safely and securely online.

As well as providing traders with direct access to the global foreign exchange market, USGFX also provide the education, market news and analysis, and trading signals so traders can make their trading decisions conveniently and with technical analysis of the highest quality.

When you choose to trade with USGFX you trade with the USGFX advantage – which includes:

  • Regulated by the Australian Securities and Investment Commission – AFSL 302792.
  • Structured forex education course – The TradersClub Coaching Program.
  • Free access to Trading Central’s award-winning technical analysis.
  • Ultra-fast execution of orders with one-click trading
  • Optical fiber connections to interbank servers in New York, London and HK
  • Competitive spreads with low slippage and minimum requotes
  • Segregated Client Funds at the Commonwealth Bank
  • Negative Balance Protection
  • Withdrawals approved within 24 hours
  • Choose leverage as high as 1:500
  • Trade on the world’s most popular trading platform – MetaTrader 4
  • 24-hour client support by professional and friendly staff
  • Your own dedicated personal Account Manager
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