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Top Forex Trading Tips

October 22, 2020 by Daniels Trading| Futures 101

The foreign exchange market, or forex (FX), is a decentralized, electronic currency trading venue. Featuring more than U.S. $5 trillion in average daily turnover, the forex is the world’s largest market, far surpassing the premier U.S. equities and futures exchanges. Given its enormous size, depth, and offerings, the forex is a primary destination for active traders around the globe.

You can find thousands of forex trading tips online designed to help boost profitability. In this article, we’ll cover three points of emphasis that can help you secure market share in this fast-paced, exciting trading atmosphere.

1. Understand the Basics

Before you focus on complex forex trading tips, it’s important to grasp the basics first. Forex trading is different from trading conventional futures, options, and equities in several ways. To make a profit, understanding the key differences is essential.

On the forex, currencies are traded in relation to one another—or as pairs. Each currency pair represents the exchange rate of a base currency to a counter currency. For instance, in the EUR/USD, the base currency is the euro (EUR) and the counter currency is the U.S. dollar (USD). When trading FX pairs, the following mechanics apply:

  • Buy: When you buy a currency pair, you are assuming a long position in the base currency. If rates rise, a profit is made; if rates fall, a loss is taken.
  • Sell: When you sell a currency pair, you are taking a short position in the base currency. If rates rise, a loss is taken; if rates fall, a profit is made.

The functionality of forex trading is unique from futures and equities in that currencies are valued relative to one another. Accordingly, many factors influence currency valuations, including central banking policies and economic performance. This differs from the trade of stocks or commodities because a currency’s intrinsic value is viewed on a much broader scale.

We’ve been assisting our clients in making sound trading decisions for over 25  years.  Trust a Daniels Trading broker to help you reach your trading objectives in  any market.

2. Define Your Goals

As in other markets, forex trading requires participants to place capital into harm’s way. Because of this fact, successful traders clearly define their goals before ever entering the marketplace. They accomplish this by taking the following steps:

  • Identifying financial objectives: You need to decide how much profit is acceptable on a daily, weekly, and monthly basis.
  • Quantifying resources: Complete an honest inventory regarding the amount of time and capital you have available for FX trading is essential.
  • Adopting a suitable strategy: Once you’ve set your financial goals and quantified your resources, you can develop strategies that maximize the probability of success. Viable strategies will incorporate ideal risk versus reward ratios to beneficial intraday, day, or swing trading methodologies.

Perhaps the most valuable among all forex trading tips is this: Be sure to align your resources to your goals. By doing this, you’ll be able to optimize your capital efficiency and focus your operations in a strategic way.

3. Build a Plan

It’s important to have a comprehensive plan in place before you start active trading. A good plan provides a structured approach to trade selection, position management, and risk management. Without a plan, your odds of success drop exponentially.

When building your currency trading plan, be aware of these three forex-specific factors:

  • No expiration: In contrast to futures and options, forex currency pairs do not have an expiration date. Positions may be held in perpetuity as long as margin requirements are satisfied and you pay the carrying costs.
  • Variable bid-ask spreads: Forex pairs are priced with respect to a bid-ask spread that includes the cost of brokerage execution. Additionally, spreads fluctuate during periods of heavy volatility and sparse participation.
  • Leverage: Forex pairs are traded on margin, with varying degrees of applied leverage. In the U.S., leverage is limited to 50/1 or a 2 percent margin requirement.

A rock-solid forex trading plan needs to address trade horizons, spreads, and applied leverage. If not, even the best forex trading tips are likely to produce inconsistent results.

Interested in More Forex Trading Tips?

For anyone interested in trading FX pairs, learning the basics, defining goals, and building a plan are great places to begin. However, there’s much more to the global currency trade, and the services of a true professional are invaluable.

To learn more about what trading futures, options, and the forex can do for you, schedule your free consultation with a member of the Daniels Trading team today.

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Filed Under: Futures 101

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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