The forex market is the largest financial market, with mind-boggling amounts of money being traded every single day. The high trading volume of the forex market leaves the stock and bond markets in the dust. With trading activities happening around the clock, the forex market is always buzzing with action. Even if you have a modest amount of capital, you can enter the market and make it big. Thankfully, there are various trading tools that you can use, like indicators, charts, economic calendars and pip calculators, to simplify your trading process.

But, it’s important to understand that while the immense scale and constant activity of the forex market can be thrilling, it’s also challenging. But don’t worry, as in this article, we are going to spill beans on 5 forex trading secrets that will help you succeed in your trading adventure. Without further adieu, let’s get started!

Step #1 – Pay Attention to Daily Pivot Points

No matter if you’re a day trader or more into position trading, swing trading, or even long-term trading, you should pay a close look on daily pivot points. If you have a basic idea about how the market works, you might know how markets often find support, resistance, or change direction, at pivot levels simply because many traders place orders at those levels. These traders believe in the power of pivots. So, when you see significant trading moves happening at pivot levels, it’s not necessarily because of some fundamental reason. 

It’s mostly because a bunch of traders expected that move and placed their trades accordingly. This is not to say that pivot trading should be the only thing you rely on for your trading strategy. It’s just that you should closely monitor daily pivot points regardless of your strategy. They can give you indications of whether a trend will continue or if there might be a potential market reversal. Just look at the candlesticks near the pivot points to plan your trading moves because pivot points can work as a technical indicator confirming an uptrend or downtrend. 

Step #2 – Trade With an Edge

The most successful traders are the ones who only risk their money when they have an advantage, something that increases the likelihood of their trades being successful.

Your edge can be anything that gives you an advantage in the market. It could be as simple as buying at a price level that has previously shown strong support for the market or selling at a price level that you’ve identified as a strong resistance.

It’s helpful to have several technical factors working in your favour to boost your edge and increase your chances of success. For instance, if the 10-period, 50-period, and 100-period moving averages all come together at the same price level, that should provide significant support or resistance because you’ll have traders basing their actions on any of those moving averages all acting together.

Having multiple indicators in your favour can also involve the price hitting a known support or resistance level, and then seeing price action at that level suggests a potential market reversal, such as a candlestick formation like a pin bar or doji. 

Step #3 – Preserve Your Capital

In forex trading, it’s actually more crucial to avoid big losses than to chase big profits. This might sound strange if you’re new to the market, but it’s the truth. Winning at forex trading means knowing how to protect your capital. Unfortunately, most individuals who start trading currencies don’t follow the right money and risk management plan, and they blow up their account eventually.

However, if you strictly practise solid risk management rules, you will eventually become a profitable trader. If you can preserve your trading capital by avoiding devastating losses, you’ll be able to keep trading. And sooner or later, a massive winning trade, a “home run,” will come your way, skyrocketing your profits and the size of your account. You can also use a profit calculator to find out the profits you have made in the currency of your choice. 

Step #4 – Simplify your Technical Analysis

Mostly technical analysts draw countless lines and indicators on a chart, but in trading, it should be remembered that more isn’t always better. In fact, using a lot of indicators often just confuses traders, making them doubt themselves and miss the bigger picture. On the other hand, a relatively simple trading strategy works better in generating successful trades. You will see that the most incredibly successful forex trader who makes money from the market almost every single trading day doesn’t even use any technical indicators. They like to keep their charts naked, with no trend lines, no moving averages, no relative strength indicator, and definitely no fancy expert advisors or trading robots. A basic candlestick chart is just enough for them to identify candlestick patterns that indicate the trend reversal, like pin bars, shooting star or hammer patterns. These patterns form at or near levels of support and resistance, which can be identified by looking at the market’s previous price movements. Basically, you don’t always need many complicated indicators to succeed. Sometimes, a simple strategy based on clear patterns can do the trick.

Step #5 – Place Stop-loss Orders at Reasonable Price Levels

Risk management is a crucial aspect of trading. It’s not just about protecting your capital when a trade goes south, although that’s definitely a part of it. It’s also a key element in actually winning at forex trading. Many newbie traders make the mistake of thinking that risk management is all about placing stop-loss orders really close to their entry point. And sure, it’s true that good money management means you shouldn’t risk more than you can reasonably gain if the trade turns out to be a winner. So, you don’t want to set your stop-loss levels too far away from your entry point, creating an unfavourable risk/reward ratio. 

However, some traders tend to set their stop orders way too close to their entry point. They get stopped out for a loss, only to see the market turn back in their favour and reach a level that would have brought them a nice profit. 

So, the lesson here is twofold. Firstly, you should place a stop-loss close enough to avoid a significant loss. You don’t want to risk everything on a single trade. But secondly, you also need to set your stop orders at a price level that makes sense based on your market analysis. If you have witnessed a decent pip movement, try to book them or use a trailing stop loss. Once booked, you can use a pip calculator to calculate the pips you have captured in the trade. 

A general rule of thumb often mentioned is placing your stop-loss order slightly above the support line if you intend to go short or below the resistance line if you are going long, but make sure to enter a position after it retests the support or resistance levels.  

In The End

The forex market has its own unique quirks, just like any other trading market. To succeed in this market, you must take the time to understand these characteristics. It’s all about learning, practising, and studying. To conclude, some tips that can really help you win in forex trading are paying attention to pivot levels, Trading with an edge, Preserving your trading capital, Simplifying your market analysis and setting your stop-loss orders at genuinely reasonable levels. Although these tips don’t cover everything there is to know about forex trading, they’re a solid foundation to get you started. Remember these principles, and you’ll definitely have an advantage in the market.