The forex marketplace is arguably the largest and most liquid there is – with daily trading volumes averaging over $6 trillion. As such, more and more people are looking to take advantage of the opportunities such volatility and liquidity can provide.
If you are keen to jump on the bandwagon but need a few tips for success – stay right there.
Today we uncover the top 7 forex secrets for 2021. This includes everything from the fundamentals to risk management techniques and commonly adopted strategies. We finish with a review of the best three brokers to facilitate your forex trading endeavors.
eToro - Buy and Invest in Assets
eToro - Buy and Invest in Assets
Table of Content
Forex Secret 1: Gain an Understanding of the Currency Markets
Whilst it’s not a secret per-say, the first thing you should do is learn the ins and outs of the currencies you wish to trade. All too often people enter the currency market knowing nothing about how it works, and this often results in losses.
See below a simple explanation of the basics for any newbies.
When trading forex, it’s important to know that there are three types of currency pairs – ‘major’, ‘minor’, and ‘exotic’.
We have given an example of each with key characteristics below:
- Major FX Pairs: A key characteristic of major currency pairs is that they invariably include the world’s reserve currency – the US dollar. This category of forex pair is the most widely traded so often comes with tight spreads. This reduces the cost of trading forex. Major pairs are considered the least risky to trade, but will probably produce lower returns.
- Minor FX Pairs: We sometimes refer to minor pairs as ‘cross-currency’. This category never includes the US dollar, but will always consist of two currencies from a robust economy. For example, the Japanese yen or euro. Note that if you trade a liquid minor like EUR/GBP, you should still experience high liquidity and tight spreads.
- Exotic FX Pairs: Notably – exotic pairs always include an emerging currency, such as the Mexican peso or Brazilian real. This category of pair is less traded and therefore will come with wider spreads. Whilst probably not suitable for newbies, exotic pairs can offer some great opportunities thanks to dramatic price shifts. For instance, USD/RUB has moved by thousands of pips in recent years.
The forex marketplace experiences extreme price fluctuations at every moment. Whilst volatility means increased risk – the greater the risk the better the reward is – if you succeed. As such, it’s not a necessity to always stick with the safety and low spreads of highly liquid pairs.
When you understand the markets to a degree you are comfortable with, you can make the most of such huge price fluctuations. The most volatile exotics include USD/SEC, USD/TRY, and USD/BRL. In terms of minor pairs, NZD/JPY, AUD/JPY, CAD/JPY, and AUD/GBP experience the most price action.
Notably, the least volatile pairs to trade are majors like USD/CHF, USD/JPY, EUR/USD, and GBP/USD. As such, these might be better for small but regular gains.
An important, albeit usually small cost to factor in when trading forex is the spread. It is like a small brokerage fee and essentially the difference between the buy and sell price of the forex pair in question.
See an example below:
- You are trading GBP/USD
- The sell price is £1.3755
- And the buy price is £1.3753
- The spread on this pair is 2 pips
Being aware of what the spread is will help you better work out your potential profits and losses from a forex trade. In the above example, you are beginning your trade 2 pips in the red. Anything you make over 2 pips is profit.
Leverage on forex is offered in most jurisdictions. This can be a powerful weapon, boosting your trading position with more than your account permits.
See an example below of how leverage can grow your gains:
- Let’s say you want to trade US dollars against the Russian ruble
- USD/RUB is priced at ₽75.53, which you think is undervalued
- You place a buy order of $200 with 1:30 leverage
- Your position is now worth $6,000 (200 * 30)
- You were right, hours later USD/RUB is valued at ₽85.34 – a 13% increase
- Without leverage, your gains from this trade were $26
- With leverage you made $780!
As you can see, if used carefully, leverage can be one of the best forex secrets to add to your trading arsenal! Also note that if the pair had gone the other way, this position would be closed in the red.
Forex Secret 2. Enter the Currency Market with a Plan
One of the most valuable forex secrets is to enter the market with a plan. Whatever your trading style might be – you need to create a sound strategy to begin with. This will prepare you for every eventuality.
We talk about some of the most simple but effective forex secrets next.
Try Swing Trading
If you are a beginner looking for forex secrets – swing trading could be a good way to enter the currency markets. This will see you speculating on possible trends, hoping to make gains from price fluctuations on your chosen FX pair.
You might hold on to your trade for days, or even weeks. This is well suited to people who wish to monitor price charts regularly, but not all day – every day. As such, the swing trading strategy is also a great way for beginners to enter the world of forex.
See an example of how swing trading works:
- You are trading AUD/USD which is priced at AU $0.77
- Price charts and trend indicators suggest this is undervalued
- You place a $300 buy order to go long on this pair
- After 2 weeks AUD/USD rises to AU $0.82
- This illustrates 6.4% increase, as such you made $19.20
Unlike in day trading, whereby you are looking to make small but regular gains, swing trading sees you holding onto your trade until you spot a temporary countertrend.
You will probably look to go long during ‘swing lows’ and go short during ‘swing highs’. If you wanted to try trading a forex pair with less liquidity, and wider spreads – this is less likely to affect your gains when swing trading, as your targets are bigger.
Diversify Your Portfolio
We couldn’t talk about forex secrets without mentioning the importance of diversifying your trading portfolio. This means – don’t concentrate all of your energy into just one asset class. This is especially the case when partaking in swing trading, which can see your position open for weeks.
All markets experience various highs and lows in terms of value, thus by creating a mixed bag, you are less vulnerable to one market’s short-term failings.
- Let’s say you were swing trading GBP/USD before Brexit happened
- There was much uncertainty surrounding the United Kingdom’s exit from the European Union.
- As such, in July 2016, the British pound had reached its lowest value in 31 years.
- If you also had US stocks in your portfolio at that time, the chances are you wouldn’t have been as concerned about the failings of GBP/USD
This is because many of the US markets flourished. The Dow Jones and S&P 500 in particular reported record highs after their initial post-Brexit dip. Even the Nasdaq was on the up.
As you can see, diversity is a positive thing, and this is especially the case on the currency trading floor!
Forex Secret 3: Actively Manage Your Risk
Managing your risk depending on your tolerance for volatility is another tried and tested forex secret. Risk management is used to try to maintain control in all potential eventualities.
See below some risk-management tools and techniques you can try yourself
Think about how much you are willing to risk on forex, and for what reward. To give you an idea, a commonly used ratio is 1:2, which would mean that for every $1 you stake, you aim to make $3 back. Another common system is 1:3.
See a simple example:
- You decide on a risk/reward of 1:3
- You place a $100 buy order on AUD/EUR
- The expectation is to make $300 in profit from this forex trade
The risk/reward strategy can be used alongside ‘stop-loss’ and ‘take-profit’ orders, which we talk about next.
Stop-loss and Take Profit Orders
Actively managing your risk is one of the fundamental forex secrets. As we mentioned, stop-loss and take-profit orders are perfectly suited to the aforementioned risk/reward system. By using both on every single forex position, you can better control your entry into and exit from the currency markets.
- A stop-loss order allows you to set a price at which your trade is closed, and your losses stopped
- A take-profit order enables you to set a price at which your position is closed, and your gains locked in
See an example of a stop-loss and take profit order used on the same trade:
- Let’s say you are trading US dollars against Japanese yen – priced at ¥108.70
- Using a risk/reward of 1:3, you place a sell order to short USD/JPY
- As you are going short, you set the stop-loss 1% at ¥109.78
- As such, your take-profit is 3% is set at ¥105.43
- If USD/JPY rises to ¥109.78 – the trading platform closes your position to stop further losses
- If the pair falls to ¥105.43 – the platform closes the trade to lock in your profits
Notably, your USD/JPY position will be closed when either price point has been reached – saving you from needing to manually watch the markets. Using both stop-loss and take-profit order on every trade is one of the best forex secrets used to manage risk.
Forex Secret 4: Learn Techincal Analysis
Many forex secrets lie in learning technical analysis. This is undoubtedly one of the best ways to make educated decisions when trading currencies.
As well as the best forex indicators, we have listed the most valuable tools in technical analysis below:
- Support and Resistance Levels: Moving Average Convergence Divergence (MACD), Ichimoku Cloud, Fibonacci Retracement, Pivot Point, Relative Strength Index (RSI)
- Chart Patterns: Head and shoulders, cup and handle, pennant or flags, ascending tirangle/descending triangle, symmetrical triangle, double top/double bottom
- Momentum/Volume Indicators: Stochastic Oscillator, Average Directional Index (ADX), Moving Average Convergence Divergence (MACD)
- Price Trend Indicators: Bollinger bands, Exponential Moving Average (EMA), Average Directional Index (ADX), Relative Strength Index (RSI),
As you can see, some indicators and tools cover various forms of technical analysis and can be used with one another. Notably, Standard Deviation (SD) is compatible with many of the above indicators. This shows you how much variability is in your data set.
Third-party trading platform MetaTrader4 (MT4) offers a plethora of advanced and educational trading tools such as customizable price charts, drawing tools, and indicators.
Forex Secret 5: Reign in Your Trading Emotions
Next up in our top 7 forex secrets comes from trading psychology and the belief that there are emotions experienced by all traders. These are primarily centered on fear and greed.
See how these emotions might affect your forex trading endeavors:
- Fear: When fear comes into play, you may feel reluctant to close an open forex position, or enter one. The most common role fear plays when trading currencies is to hold on to a failing trade for longer than you should. Moreover, the fear of making a poor decision could see you walking away from an otherwise profitable trade.
- Greed: A common signal of greed is throwing everything at a currency pair based on its previous success. Greed can also see you jumping onto a rising forex asset too late, ignoring your own trading plan, throwing caution to the wind, and ignoring stop-loss and take-profit orders.
Next, let’s offer some ideas of how to deal with each emotion, starting with fear:
- Diversify your trading strategies so that you don’t have to live in fear of position performing badly.
- Conduct plenty of research and perform technical analysis.
- Try forex signals or Copy Trading to trade semi-passively.
- Understand the difference between irrational fear and founded fear.
Fear isn’t always a bad thing. For instance, let’s say technical analysis points toward the FX pair you are trading falling rapidly. It’s understandable to feel a fight-or-flight response. As such, you are likely better at listening to the fear and proceed to close your trade.
Next, let’s see how you might control greed when forex trading:
- Follow your own trading plan at all times, no matter how good the opportunity seems to be
- Practice self-discipline
- Keep a trading journal so that you can look back at a logical record of what works for you and what doesn’t
- Try a strategy such as hedging
Another way to reign in your emotions is by trading passively. We talk about this subject next.
Forex Secret 6: Trade Currencies Passively
Two of the best-kept forex secrets are automated forex trading and signals! Some traders simply don’t have time to keep a constant eye on the ever-changing highs and lows of foreign currencies.
Alternatively, perhaps you are brand new to forex trading and are yet to learn the complexities of such in-depth research? Below we divulge several ways to trade forex – without having to do any of the legwork.
Forex Trading Signals
Forex signals are a phenomenon amongst both seasoned and new traders. In case you have never heard of this semi-passive way to trade – it’s like signing up for ‘forex tips‘.
The most popular method is via free and encrypted messaging service Telegram. The app enables groups of up to 200,000 members, and you receive signals instantly thanks to cloud-based messaging.
Our team of seasoned forex traders here at Learn 2 Trade have years of experience in this space. Our in-house researchers and traders perform hours of sophisticated technical analysis throughout each day. In a nutshell, we search for potentially profitable Forex opportunities – so that you don’t have to.
See an example below of a forex trading signal, so you know what to expect:
- Asset: EUR/USD
- Position: Long
- Limit: €1.1970
- Stop-loss: €1.1850
- Take-profit: €1.2329
Here the signal has incorporated a risk/reward of 1:3. Alternatively, if analysis led our team to believe a short position was the best option, the stop-loss would be above the limit and the take-profit below.
After revealing our top forex secrets, we are going to review the top platforms to trust with your entry into and exit from the market. Notably, two of them have a Copy Trader feature – which is a clever way to trade passively.
At top-rated broker eToro, you can select from just under 6 million Copy Trader investors. Simply invest in one you like the look of and copy them like-for-like. You can choose who to invest in based on information such as their preferred forex markets, risk level, and success rate. You can also view historical charts and such.
If the person you are copying allocates 2% to JPY/CAD and 3% to USD/CHF – 5% of your investment has also gone into these two pairs. Whatever they buy, sell or trade will be mirrored in proportion to your investment. This enables you to trade your preferred forex market without having to perform any research or place any orders.
As such, this is undoubtedly one of the best forex secrets. On a side note, CFD broker AvaTrade also enables Copy Trading. However, this is achieved by linking your account to a third-party platform such as ZuluTrade, MT4, or DupliTrade.
If you like the idea of trading signals but would rather adopt a completely passive approach – consider forex robots, also called FX bots or EAs (Expert Advisors). Based on built-in software and algorithms, forex robots are tasked with monitoring the markets to find trading opportunities.
Forex robots lack the aforementioned trading emotions. Furthermore, they don’t require rest or sleep to function so can scan and track the currency markets 24/7. The EA is programmed to decipher technical analysis and then place orders accordingly.
If forex robots sound like something you might want to try, proceed with caution. This service will rarely be free. There are heaps of disingenuous websites promising huge financial gains to unsuspecting forex traders. The best idea is to try one out via a free demo account.
Forex Secret 7: Learn Forex for Free
One of the biggest forex secrets has to be to learn forex for free! There are various ways to do this – namely free demo accounts and online courses.
Free Demo Account
The vast majority of forex brokers will provide clients with a free demo account. This will come with paper funds and aims to match real-world market conditions.
This means you can practice strategy ideas such as different risk/reward ratios, hedging, and more without risking your capital. You might also learn technical analysis by using this method, whilst finding your feet.
For instance, eToro will give you two accounts when signing up, one is real, and the other is virtual – giving you $100,000 to learn forex for free.
Online Forex Courses
There are heaps of free forex courses in the online space, enabling you to better utilize the aforementioned currency trading secrets. For instance, here at Learn 2 Trade, we offer a hundreds of free educational resources that can taker your forex trading endeavors to the very next level. We also offer a premium forex course that comes packed with hours of in-depth and comprehensive information.
We also offer lessons on how to make the most of price fluctuations, guides on forecasting future events, implementing technical and fundamental analysis, and more.
Best Forex Brokers 2021
Having made it this far in our guide on the best forex secrets, you are probably armed with knowledge and eager to start trading. Crucially, you are best to access such markets via a trusted brokerage.
Key considerations when searching for the right broker for you should include:
- Regulation: Regulatory bodies keep the forex trading scene free from crime and shady brokers. Licensed platforms much follow KYC, keep your funds in a separate bank account, and submit regular audits.
- Forex pair and asset diversity: The more forex pairs, and alternative markets you have at your disposal the better. One of the biggest forex secrets is to keep a diverse portfolio to hedge against market volatility.
- Low fees and commissions: The tighter the spread, and the lower the commission fees are to trade forex – the better it is for your profit potential.
- Platform usability: It’s important that you find the brokerage site easy to navigate and that the design is suitable for your level of trading experience.
In case you haven’t chosen a platform to trade forex, you will see the results of our extensive research below.
1. AvaTrade – Heaps of Trading Tools for Forex CFD Trading
CFD broker AvaTrade has been on the forex scene for years. This platform offers access to various assets, including commodities, indices, bonds, ETFs, stocks, cryptocurrencies, and 55 forex pairs. Six different jurisdictions - including the British Virgin Islands, Australia, and South Africa regulate this broker, so you are in safe hands.
You can trade forex or any supported asset at this platform without paying a cent commission. We found the spread on forex pairings to be competitive. For instance, on major pair AUD/USD the spread averages 1.1 pips. The spread is 0.9 pips for EUR/USD and 1.1 pips for USD/JPY.
If you want to trade minor pairs, you will find a spread averaging 2% on AUD/JPY. We also found tight spreads on CAD/CHF, and GBP/NZD amongst others. Over to exotic forex pairs, the average spread on euros against the South African rand is around 0.08%, and EUR/Russian Ruble offers an average of 0.07%.
If you would like to try out the completely passive option of employing a forex robot to carry out your currency trades - this is possible at AvaTrade. You can easily hook your account up to MT4 and search the market there for a suitable EA. You may also copy a forex trader by linking to AvaSocial, DupliTrade, Mirror Trader, or ZuluTrade.
AvaTrade offers all clients a free demo trading facility loaded with $100k in paper funds. This means you can practice our forex secrets and strategies without risking your own capital. To get started with a real money account, make a deposit of $100 using a credit or debit card, bank transfer, or an e-wallet such as Skrill or Neteller.
- Trade forex CFDs with a minimum deposit of $100
- Regulated by 6 jurisdiction's
- 0% commission on CFDs
- Admin fee payable after 12 months inactivity
2. eToro – Best All-Rounder to Trade Forex Commission-Free 2021
eToro is a hugely popular online broker supporting both traditional investments and CFDs - all commission-free. In terms of available markets, we found this to include thousands of stocks from 17 marketplaces, ETFs, commodities, indices, stocks, cryptocurrency - and, last but not least 49 forex pairs!
The FCA (UK), CySEC (Cyprus), and ASIC (Australia) license and regulated eToro. This means you can trust that this is a legitimate broker that is following rules with customer service, anti-money laundering regulation, and client fund segregation. Furthermore, your personal information is guarded by SSL encryption.
We found major forex pairs to include EUR/USD, USD/JPY, and USD/CHF - with average spreads of 0.007%, 0.009%, and 0.01%. There are heaps more highly liquid forex options. We also found tight spreads on minors such as EUR/CHF averaging 0.04%, and GBP/AUD with a spread around the 0.02% mark.
In terms of exotics, as we mentioned these will invariably come with a wider spread because the market is less liquid. To give you an idea, we found USD/TRY with an average spread of 0.12%, and USD/PLN at 0.06%. There are many more to choose from and the spread will fluctuate along with the price.
If you want to add some of the discussed forex secrets to your trading strategy, it's easy with this broker. eToro offers a Copy Trader feature, allowing you to trade passively. We spoke about this earlier under section forex secret number 6. If you would like a fully managed portfolio, you can also check out the CopyPortfolio feature. eToro also supports going long or short on your chosen pair via leveraged CFDs.
Retail clients can access 1:30 leverage on major pairs, and 1:20 on minors and exotics. Always check leverage restrictions in your jurisdiction. For instance, some can access 1:50 or even 1:400. Finding your chosen forex pair and adding stop-loss and take-profit values to your order is easy at eToro and you can practice on a free demo account with $100k INB paper funds. This broker accepts tons of payment types including credit and debit cards, bank transfers, and e-wallets such as PayPal and Skrill.
- Heaps of accepted payment types, including PayPal
- Trade forex with 0% commission
- Low spreads on 49 forex pairs
- No technical analysis
3. Capital.com – Best Forex CFDs for Newbies - Minimum Deposit From $20
Capital.com is a great forex CFD platform for newbies. The broker offers access to heaps of markets, including cryptocurrencies, shares, indices, and around 70 forex pair combinations. CySEC and the FCA regulate this broker for your protection. You will not pay any commission when trading forex CFDs via this provider.
We checked out the spread on offer, starting with major FX pairs. GBP/USD and AUD/USD both come with an average spread of 0.009%, EUR/USD offers 0.005%. Minor pairs such as GBP/JPY come with a spread of around 0.02%. There are heaps more, all with tight spreads.
Capital.com offers access to a good variety of exotic forex pairs with competitive spreads across the board. We couldn't possibly list all of them, but found that EUR/RUB comes with an average spread of 0.06% and NZD/RUB at 0.03%.
Both beginners and seasoned traders can access heaps of educational content. This includes an entire section dedicated to learning how to trade various assets and instruments. You can also see multiple webinars, news and features, economical calendars, and online courses. Capital.com offers a free demo account with $10,000 in paper funds, so you can practice forex for free.
This platform is well-suited to beginners as you can deposit just $20 to get started. You won't have any trouble finding your preferred payment type. This CFD broker is compatible with credit and debit cards, bank transfer,s and e-wallets such as Apple Pay, iDeal, Trustly and more.
- $20 minimum deposit to trade forex CFDs
- Heaps of trading tools and works with MT4
- Regulated by CySEC and FCA
- No fundamental analysis
Top 7 Forex Secrets: Full Conclusion
Learning the ins and outs of the currency markets can be a long and daunting journey. By utilizing the top forex secrets discussed on this page – you will be in a better position to embrace any opportunity that comes your way – or resist it.
It’s important to keep a check on your trading emotions – especially in the case of fear and greed. Having a plan and sticking to it is a good start. However, you could also use popular strategies such as diversifying your portfolio, hedging, keeping a trading journal, and learning forex for free.
Finally, by accessing this volatile market via a regulated and commission-free broker such as eToro, you can expect tight spreads across most forex pairs. The broker will give you a free demo account with $100,000 in paper funds and getting started takes minutes!
eToro - Buy and Invest in Assets
eToro - Buy and Invest in Assets
How can I win consistently in forex trading?
There is no way you can guarantee consistent wins in forex trading. However, by adding some of the top forex secrets discussed on this page to your trading strategy - you have a better chance at success. Always use a stop-loss and take-profit order on every forex trade to manage your risk. Learning technical analysis is crucial to predicting the currency markets. You can also try trading signals or the Copy Trader feature whereby you copy a seasoned forex trader like-for-like.
Can I trade forex with $100?
Whether or not you can trade forex with $100 depends on the broker you choose. For instance, at Capital.com - the minimum deposit is just $20, and you can start trading forex at AvaTrade from $100.
How much money do forex traders make in a day?
The answer to this question isn't black and white. How much money you can make in a trading day will depend on various factors, such as whether you apply leverage, the amount you have to stake - and correctly timing the markets.
Can I learn forex for free?
Yes, you can very easily learn forex for free. This can be achieved by signing up with a broker offering a free demo account facility. Regulated broker eToro is commission-free and offers tight spreads on currencies and other assets.
What is the most profitable forex pair?
It is widely believed that as well as being one of the most popular forex pairs to trade, EUR/USD is also the most profitable. This pair invariably offers super-tight spreads which cuts down trading costs. The most volatile time to trade this FX pair is between 7 am GMT and 8 pm GMT.