BeanFX Forex Trading Tips
The following tips will be of great help to you when it comes to trading Forex.
- The number one tip is to ensure that you have the right mindset or fame of mind. Making trading decisions when the mind is troubled can lead to making wrong trades.
- Always check out the economic calendar for news release time and period. Ignoring this may be dangerous to your technical analysis.
- Identify a currency pair of interest or your favourite (if you have one).
- Identify the right time frame that has trading opportunity (where price is trending).
- Check if the currency pair is trending, (is it forming Higher Lows and Higher Highs, or is it forming Lower Highs and Lower Lows?)
- Identify if price is at the Support or Resistance area (price may range here). Is price breaking out of the Support or Resistance area? (A new trend might start here). Is price approaching the Support or Resistance area? (Trend reversal may start here). Identify the major and minor Support and Resistance levels. Major levels have multiple price test than minor levels.
- Identify the candlestick pattern on your chart. Is it a Bullish Engulfing bar, pin bar of hammer? Research more on Trend Continuation and Trend Reversal candlestick patterns and master these patterns.
- Always use stop-loss. Admit that loss is part of trading. Of course, the amount of stop-loss in pip value differs depending on the time frame in view. Stop-loss pip value of a 15 minutes time frame will definitely be small compared to stop loss pip value of the Daily time frame. Avoid revenge trading – trying to trade aggressively to recover immediate loss will not do you any good.
- Take a break. Exercise or read books, or engage in activities that are not related to Forex during breaks.
- Learn everyday. Learning about Forex, strategies and methods is endless. Create time to learn new style of trading everyday.
- Learn to be patient, disciplined and avoid greed.
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Questions you need to ask yourself before trading at the start of the day
Am I under any financial pressure? (If no, you may trade. If yes, avoid trading for the period until you have settled all your financial issues. Trading on loan is not advisable. Do not trade on money you cant afford to lose)
What is my strategy for the day? (Define your strategy as much as possible, more especially when you have lots of high impact fundamental news that are due to be released)
What is my plan? (Remember the saying, if you fail to plan, then you are planning to fail)
What is my trade capital/equity/balance like (high/low)? (If your have low trading capital, you may consider using a cent account. However, with small trading balance, using very low lot size might not be a bad idea. Avoid trading high lot size no matter what)
How much profit do I intend to make on my balance at the end of today? ( Setting a target of making 1% to 5% profit increase on your trading account for the day is a very good step to start the day with)
What is the maximum loss my trading account can bear for the day? (The most common saying amongst traders is that you can risk 1% of your trading balance per trade. However, with the availability of CENT accounts, you can split that 1% to smaller risk sizes and make more trades).
What is the maximum possible lot size I can use on my trading account for the day? (The maximum lot size for the trading account must be defined at the very start. Most traders regret opening trades with high lot size on accounts with small balance. Ideally, for a $100 trading account balance, using a maximum of 0.01 lot is not a bad idea. On the other hand, 0.01 lot on a mini account is the equivalent of 1.0 lot on a CENT account. With a CENT account, $100 will be equals to $C10,000 cents, and more trade positions can be opened with this type account).
How many trades/positions can I place on the maximum lot size? (Basically, for a $100 account, maximum of one position/trade can be opened with just 0.01 lot. However, with a $500 account, 5 positions/trades can be opened with 0.01 lot size each).
What is the economic calendar saying (is there any high impact news on the table for the day)? (Ignoring fundamentals/news can be painful to traders sometimes. Checking the economic calendar to know if a high impact news will be released during the day will be of great help. Most of the time, when trades are opened few minutes before a high impact news release, such trades leads to big drawdown on the trading account. Keeping record of fundamentals/news is very important).
What are the current trending currency pairs? (A quick scan of the currency charts can be very helpful at the start of the trading session. Trend opportunity do present itself when price forms Higher Lows and Higher Highs-Bullish Trend or Lower Highs and Lower Lows-Bearish Trend).
How many pairs can my maximum lot size or account handle? (At times, three or more pairs may be trending at the same time. However, discipline must be maintained to avoid overtrading).
Should I stick to my favorite pair (is it trending)? (Having a favourite pair might not be a bad idea. The most important thing is that it must be trend for it to be traded on)
When should I close for the day? (The amount of time spent on the chart depends on the trader. Spending hours or the whole day looking at the chart is highly discouraged as this might lead to fatigue and boredom. Spending a short time – 5minutes to 30 minutes at every four or six hour interval might not be a bad idea).
Strategies/Clues That You May Consider In Your Trade Decision Making:
You may consider the following before placing that trade:
Previous Day High And Low Breakout: Marking out horizontal lines on your chart to identify the high and low of the previous day candle is very important. Watch out for price action or reaction to the two levels.
Ask yourself these questions before placing that trade. Is price testing the previous day high or low line. Do I see price breaking the previous day high or low line? Is price ranging/consolidating around the previous day high or low line?
Price Action Around The 50, 200, And 1,000 Simple Moving Averages: The moving average indicator is commonly used by traders. Price reacts differently to the 50SMA, 200SMA and 1,000SMA and the reaction depends on the time frame you are looking at.
Consider the following questions before placing that trade; Is price approaching any of these moving averages? (It might serve as price potential Support or Resistance level). Do I see price breaking any of these moving averages?
Is price ranging or consolidating around any of these moving averages? Do I see price rejection at or near any of these moving averages?
Candlestick Patterns: Candlestick patterns on different time frames differ. It is important to monitor the change in candlestick formation or progression before placing your trade.
Consider the following questions; The length of the current set of candlesticks, are they longer than that of the previous ones? (This may show an indication of increasing volume, impulsive price movement or trend development/continuation).
Are the current set of candlesticks shorter than that of the previous ones? (This may show an indication of decreasing volume, corrective price movement or price range/consolidation).
Is the current or previous candlestick having a long wick? (This may show an indication of trend reversal).
When the body of the current or previous candlestick is unusually longer than the previous set of candlesticks, you should know that that very candle is an Engulfing Candle bar. (This may show an indication of trend reversal or trend continuation).
Monthly, weekly or daily candlestick anatomy must be analysed on a regular basis.
Trendlines: Plotting trendlines can be very useful in your trade decision making process. Monitoring trendline breakout is very important for you to spot trend reversal moments.
Price Structure: Analysing the current price structure is very key. Is price trending or ranging?
What is the Higher Time Frame Saying: Price bias on the higher time frame must not be ignored.
Forex Price Action to the Left Side of the Chart: Price behaviour to the left side of the chart is very important and should be monitored.
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2 Replies to “BeanFX Forex Trading Tips”
Thanks for this. Helpful.