Three Tips For Effective Forex Trading

Here are 3 small but effective tips I've picked up reduce the number of my losing trades and increase the number of profitable trades:

• #1 When setting your stop, avoid numbers that end in zero.

This is not due to superstition! Round numbers represent key psychological levels in the minds of traders and institutions.

Price does very often pull back to a number that ends in zero and goes no further.

So instead of setting your stop at a zero, add one or two pips, that takes you to the right side of the zero and reduce the number of times you will be stopped out.

• #2 Calculate your stop according to strategic levels, not a fixed amount.

It's very common to set stops somewhere between 20-30 pips. Many new traders tend to do a simple calculation to establish their stop level: entry price plus/minus 25 pips.

If you instead look at a previous support/resistance level and see if a 20-30 pip stop puts you near one of those levels.

If it does, then calculate more precisely. You don't want to set a 20 pip stop if a major support/resistance line is 25 pips away from your entry level.

If price go against you, it will go to that support/resistance level to test it, and stop out your trade, before bouncing.

You must identify such key levels and set well-thought out stops in order to avoid to be stopped out when your appraisal of price direction was correct all along.

• #3 Trim your target by 2 or 3 pips.

One moment you see a nice profit of 25 pips, the next moment you're down to 15. Anxiety sets in as you wonder whether price will go back to retest the previous level.

What to do? wait for the retest or just take the 10 or 15 pips left on the table?

If you trim 2 or 3 pips off your target, you will avoid many of those situations.

What a nice feeling to see the price spike to your target limit, take out your trade with a 20-30 pip profit, and then retrace.

Use these 3 tips to make your Forex trading sessions much less exhausting mentally, and more profitable.

DISCLAIMER

Forex trading carries a high level of risk and may not suit all investors. The high degree of leverage can result inmassive profits or losses. Before deciding to invest in foreign exchange consider your investment objectives, level of experience, and risk appetite. The possibility of loss of some or all of your initial investment exists and therefore you should not invest money you can't afford to lose. You should be aware of all risks associated with Forex trading and seek advice from an independent financial advisor should you have any doubts.

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