Arbitrage Bands

Top 10 Tips for FX Traders

1. Do not do it. At first glance, FX trading may look like a zero sum game, meaning the losses made by one participant will be balanced by gains made by another, but factor in bid/offer spreads, charges plus the cost of leverage and the average retail trader is facing an uphill struggle. Recent research by the Autorité des Marchés Financiers, the French regulator, found over a four-year period, that 89 per cent of retail forex traders lost money. In all, 13,244 people lost nearly €175m between then; 1,575 traders made a total of €13.8m. The casino usually wins. As one recent FT commenter put it, forex trading is a dull way of losing everything. More forex trading tips here http://www.arbitragebands.com/

2. Still believe you can beat the odds? Why? What inside track do you have that others do not? Currencies sometimes move as a result of fundamental newsflow, such as the release of economic data or political events. But sometimes they do not: FX markets engage in a “random walk” instead. Analysts and commentators will then select the newsflow that fits to justify these movements, ignoring anything that does not fit the pattern. And even if the newsflow is driving markets, can you predict it better than those against whom you are trading?

3. The other widely talked about driver of short-term moves in FX is technical analysis. There is a wealth of whizzy patterns to learn here, from head and shoulders to double tops, Fibonacci retracements and the perhaps apposite hanging man. You may think learning these patterns gives you an inside track, but remember those on the other side of the trade to you have probably also learned them.

4. If you still see yourself as being among the 11 per cent of winners, before losing any real money it might be best to test your hypothesis by opening a dummy account, where you are playing with pretend money. A number of FX trading platforms offer these. If your chosen platform does not, you might want to wonder why.

5. Because currency movements tend to be quite small, most profit-seeking trading is done with leverage. It is an obvious point, but start with low levels of leverage until you get the hang of this, otherwise losses (or potentially even, occasionally, gains) can spin out of control.