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Simulated Forex Trading: Why It Is Vital For Traders

Simulated Forex trading, also known as paper trading or demo trading, refers to a risk-free environment where Forex traders can test strategies, study market dynamics, and navigate trading platforms with no risk of incurring real financial losses.

Here at Axcess FX, we have written this article to underline why, if you trade, it is vital to simulate all aspects of your Forex system, from strategy to execution, before trading with real money. A simulated environment acts as such a safeguard.

Read on to learn about the merits of simulated Forex trading and why it is crucial for traders of all levels.

Understanding Simulated Forex Trading

A simulated trading environment acts as a bridge, enabling traders to transition from theoretical knowledge to practical application. Seven key advantages of simulated trading compared to a live trading environment are highlighted here in Table 1:

Advantages Of Simulated Trading Over Live Trading	Simulated Trading	Live Trading
1. Fosters a deep understanding of market dynamics with no risk	✔	✖
2. Engagement with real market data without financial exposure	✔	✖
3. Allows for error and learning without financial repercussions	✔	✖
4. Builds confidence in a trading system including trade execution & decision-making	✔	✖
5. Develop, test and refine trading strategies in a secure and risk-averse setting	✔	✖
6. Analyze and learn from trading results without actual financial implications	✔	✖
7. Learn the functionalities of a trading platform before using real money	✔	✖

Table 1.

Most reputable online brokers offer simulated Forex trading, each with a varying degree of features and user interfaces. We will cover this in the section about which platforms provide the best simulated Forex trading.

The Benefits Of Simulated Trading For Traders: In-Depth

In this section we will cover in detail, each of the seven benefits of demo trading identified in table 1.

Build a deeper understanding of market dynamics without financial risk

Simulated trading platforms allow traders to encounter market dynamics where currency movements, affected by geopolitical events and macroeconomic indicators, can be observed. Without the threat of real financial losses, traders can focus purely on market education including:

Developing a real sense of market trends and patterns
Navigation of varying market conditions and scenarios
Understanding volatility and how to manage it effectively

Engage with real market data without exposure to your capital

Although actual capital is not at risk, simulated Forex trading is not just a hypothetical scenario; it is based on real-time market data.

Forex traders are still engaging with live market conditions and, witnessing first-hand how various currency pairs move in response to actual economic data and news events. Being an FX market participant without the risk of capital exposure still provides a genuine feel of the market’s nuances.

Allows for errors and learning due to the risk-free environment

Mistakes are an inevitable aspect of any learning journey. Unfortunately, mistakes in financial trading have consequences, namely a fall in capital on your trading account.

Within the safety of a simulated environment, currency traders can make errors without catastrophic consequences; instead, the mistake turns into a lesson that can be learned from. It nurtures growth, resilience, and a deeper understanding of trading.

Builds confidence in your trading system, including trade execution and decision-making

Continual practice in a simulated setting will solidify a trader’s conviction in their trading system. As they continually apply, test, and adjust their approach in a demo environment, confidence in executing trades and making timely decisions will grow.

Trader confidence, honed risk-free, is a significant advantage when transitioning from simulated to live trading. Compare this to a newbie trader throwing themselves straight into the pressure of a real money-at-stake environment with no practice. Indeed, the confidence derived from successful simulated trading:

Reduces the likelihood of impulsive and emotionally driven decisions in the real market
Prepares traders mentally and strategically for live market scenarios

illustration showing paper trading can be used by both beginner and experienced traders

Enables the development, testing and refining of trade strategies in a risk-averse setting

A simulated trading platform acts as a sandbox for Forex traders. Within its confines, you can:

Develop new trading strategies
Test and validate the effectiveness of strategies
Make necessary adjustments and refinements based on outcomes
Ensure that the strategy is robust and applicable to real market conditions

By optimizing their approach without financial setbacks, FX traders can ensure when trading with real money, strategies are well-calibrated.

Analyze and learn from trading results without financial implications

Post-trade analysis is a cornerstone of effective trading. In a simulated trading environment, a trader can dissect their performance, understanding both trade successes and failures. Without the emotional strain of real money at risk, this introspection is more objective and constructive, setting the stage for continual improvement.

a forex trader analyzing trading results

Permits familiarization with trading platforms and tools

Every trading platform has its unique layout, tools, and features. Etoro has its own proprietary trading platform which is different to Interactive Brokers, which in turn is different to Forex.com. It is vital to master your chosen platform to maximize trading efficiency. Forex demo-trading accounts serve as a testing ground, giving Forex traders the time and opportunity to familiarize, practice, and master platform-specific functionalities; ensuring they are platform experts ahead of trading a live FX market.

an online broker platform in simulated trading mode

What platforms offer the best simulated Forex trading?

Most reputable online trading platforms cater to the needs of traders looking for simulated trading functionality. Some of the notable ones include:

Etoro: A broker with its own propriety Forex trading platform that provides demo trading accounts
MetaTrader 4: A platform used by many online brokers in the U.S., including Forex.com and IG, and renowned for its user-friendly interface and comprehensive analytical tools
Interactive Brokers has a proprietary platform called TraderWorkStation (TWS) with a simulated trading environment.
TradingView: Known for its wide variety of technical analysis tools and social networking capabilities

Each platform comes with its unique features and capabilities, catering to different needs. For more details on Forex trading software including platforms, we have a written a guide here. Below is a useful video on how to paper trade on TradingView to provide further insight.

Drawbacks and Criticisms

Despite the obvious benefits we have identified, simulated Forex trading, it is not without its criticisms and drawbacks.

The lack of emotional involvement in a simulated environment can be a drawback and may:

Lead to a lack of accountability for trading decisions
Result in a skewed perception of trading risk and reward

Successful trading in the confines of a demo trading environment may result in overconfidence in live trading due to:

Success in a risk-free environment not necessarily translating to live trading success
Possible neglect of risk management strategies due to simulated success

There are limitations in simulating real market conditions and include:

An inability to replicate the psychological and emotional pressures of live currency trading
Potential discrepancies in data and market conditions between the simulated and live environments

A very good resource is available at Investopedia that further highlights not just the pros but also the cons of paper trading.

The Difference Between Backtesting and Simulated Forex Trading

Another type of strategy affirmation is backtesting, and like simulated trading is an important verification process used by traders before deploying a new Forex strategy in live trading.

Whereas simulated trading, is trading a non-live version of the current Forex market, backtesting is the use of historical price data to test a strategy and see how it would have worked in past market conditions. The two however, do work hand-in-hand.

The MT4 and MT5 (Meta Trader) based platform used by many online brokers has their own strategy tester that can be used for backtesting with historical data. It has a 90% modeling accuracy and although useful is not as reliable as the 99% accuracy available through external backtesting software that interprets data, such as Birt’s Tick Data suite.

Many traders will use both testing methods. They will put a prospective Forex strategy through a rigorous backtesting trial to see if it is profitable. They can then undertake further diagnostics by putting the strategy through it’s paces in a simulated market environment using live current market prices. The trader can then adjust and improve the performance of the strategy, all in a safe no risk environment.

A notable concern with backtesting is overfitting. Overfitting happens when a strategy is fine-tuned to perfection on historical data but fails to replicate those outcomes in real-world markets.

We have an in-depth written resource here at Axcess FX about backtesting as part of creating a profitable and reliable automated trading strategy.

How To Transition From Simulated Trading To Live Trading Effectively

We have identified four areas you should focus on to ensure a smooth transition from simulated to live trading. If you can adhere to them, you have given yourself every chance of making real money.

Gradually introduce real capital into the mix by starting with a smaller than normal trade size. It will allow you to open the door to live trading while maintaining an even more conservative risk management strategy than you are used to.
Continue to analyze and learn from a live trading experience instead of reducing focus on this important part of a robust trading system.
Be mindful of the psychological and emotional differences between simulated and live trading. It may not be evident at first, but if you start entering and exiting trades without adhering to the rules of your tested strategy and risk management process then take a step back.
Ensure all Forex trading strategies tested in a simulated environment are adaptable, with room for adjustment and not overfitted before you start trading live.

trading risk illustration with a dial at low risk

Conclusion

We hope that this article has convinced you of the merits of simulated Forex trading before moving into a live trading environment.

It is all too easy, especially for newcomers, in a desire to start making money quickly, not to build a reliable Forex trading system. Simulated trading is your safeguard to jumping the gun. If you combine it with backtesting you will be well placed for a chance at success.

Related Resources

How to troubleshoot a Forex robot that is performing badly

Written by Chris Gillie

Chris Gillie is the founder of Axcess FX, a Forex software review and research website. He is a former investment banker who worked in FX Sales on the UBS London trading floor. Chris has been using Forex trading software as part of his trading set-up since the late 2000s and the embryonic days of MetaTrader and the MQL coding language.

Automated Forex Trading Software: The Role of Robots & EAs

Forex robots and Expert Advisors are scripts that are coded with automated Forex trading strategies.

The primary way to use automated software is to import these scripts into a Forex platform such as the well-respected MetaTrader platform. Many robots and EAs develop using the Metaquote MQL language and deploy on both MetaTrader 4 (MT4) and MetaTrader 5 (MT5).

The automated Forex trading software can perform trading operations once imported into the trading platform, some with minimum trader intervention according to the algorithm’s pre-set conditions.

automated forex trading software example - FX Stabilizer

Are Forex Robots and Expert Advisors the same?

Forex robots and Expert Advisors are both very similar types of automated Forex trading software. Both are involved in the analytical part of a trade. Both undertake market analysis including charts using their internal algorithms and technical indicators to find high probability trades’ entry points.

There is one crucial difference. A Forex robot will perform trades without the need for manual sign off. An Expert Advisor is just responsible for generating trading signals, advising you if they think you should trade but not placing a trade for you. Forex robots automate the full process from trade signal to trade placement with no trader intervention.

The Main Features of Expert Advisors and Forex Robots

The algorithmic trading programs coded into EAs and Forex robots are often capable of performing varying functions.

Except for automatic order placement, which is limited to Forex robots, they share the following functionality:

Alerting the trader about market events
Risk control via pre-settled money management policies
Monitoring the compliance of a strategy concerning market conditions
Place orders to trade according to specific conditions
Opening, closing, or partial close of market orders according to the algorithm

risk control illustration from low to high risk

Video Insight

Here is an excellent video discussing whether you should trade with automated Forex trading robots:

The Advantages of Automated Forex Trading Software

There are many pros of Forex trading by robot and the most important are the following:

24/5 trading: A robot for trading Forex will automatically enter and exit Forex trades during a specified period if that is part of its programming. It means a trader does not have to be present to manage the trade placements. It could allow 24-hour trading at high volume, which is not possible for a human being. It reduces the chance of missed trading opportunities that a human trader may encounter due to physically being unable to trade. Many traders chose to use Forex trading bots as their sole trading method, while others will use it as part of a broader overall strategy.

world time zone clocks London, New York and Tokyo

Forex Robots remove human emotion: Even disciplined traders working within a robust Forex trading system can be susceptible to placing trades that may not align with strategy rules. Times of high volatility or chasing a loss can see traders who place manual trades that do not follow the logic, incur large trading losses. Automation removes psychology from trading with a focus just on following a strategy.

an emotional forex trader with head in his hands after a trading loss

Backtesting automated Forex trading software: To get an insight into how profitable automated trading systems are depends on the strategy. It is critical to undertake a backtest of the automatic trader software and have a robust money management system in place from the onset. Backtesting is essential for getting a better idea of the robot’s performance, including risk versus reward and other variables and indicators. However, good your strategy, without backtesting and money management in place, you will fail. Get it right from the beginning. Below is an example of a robot strategy backtest:

Screenshot of a forex robot strategy backtest

The Disadvantages of Forex Robots

Using a robot for Forex trading does have its disadvantages; however, these are starting to be addressed as more advanced EAs come onto the market and lower cost and faster access to FX trading.

Narrow trading conditions: Forex Robots work best with a single currency pair and in markets trading in a limited range. Volatile Forex markets with large trading ranges see more mixed results. A small number of sophisticated EAs are incorporating increasingly complex algorithms with dynamic features, including recognizing when Forex market conditions are becoming more volatile and adjusting for it. Forex Robotron is a sophisticated robot. For example, it has a dynamic stop loss and close profit feature. When this is activated, as soon as an open trade starts to lose money, the position is closed, which overrides the default stop loss position.

The requirement for a VPS server: The only downside to using robots is the need to leave your computer on if you want a robot Forex trading continuously, and this requires a reliable server, which costs more. Using a VPS or Virtual Private Server instead of lower-cost shared hosting is essential to trade Forex reliably lowering the risk of glitches or slow connections, which can affect trade placements.

illustration of performance of shared hosting compared to VPS on a dial from slow red to fast green

Who Needs Automated Forex Trading Software?

A Forex robot can be employed by all Forex trader levels, from the beginner to the professional trader.

A beginner may rely on a robot to generate regular profit as they learn how to trade. In contrast, using a defined trading strategy, a professional trader will employ a robot as an accompaniment to their trading system. Professionals often tend to use automated software to generate trade signals but will decide whether they will place the trade.

Do Forex Robots Work?

A Forex robot can work well if it is employed correctly. A Forex robot should be considered as a tool that identifies market trends and generates Forex trading signals that you, as a trader, can choose to act upon. It is the true definition of an EA, where you have the final say if you want to place that identified trade.

Where you choose when to trade means the EA is an extension of your trading system where settings and parameters are aligned as closely as possible to your strategy and currency pairs traded.

To employ a robot correctly does require an underlying knowledge of Forex trading. Beginners who use fully automated robots to execute trades are less likely to see the full benefits of employing a robot unless they get trading experience through backtesting and practicing using a F7941Ddemo account.

How Much is A Forex Trading Robot?

Forex robots are traditionally available for purchase for a one-off fee, which offers lifetime updates. Prices vary from below $250 for long-established robots like WallStreet Forex Robot 3.0 to over $500 for Forex Flex EA. One of the few Forex robots that retails on a subscription basis is Forex Real Profit EA. The complexity of the algorithms often dictates the price. Robots that include dynamic features that can adjust to changing market conditions tend to be at the upper price level. Most reputable developers will offer a 30 or 60 day money-back guarantee.

Some developers are now starting to offer automated software on a subscription basis. The merits of this from both the programmer and the user perspective is it allows ongoing development of the robot, making sure it continues to trade profitably by continuous review of built-in algorithms. Forex Real Profit EA is available on a subscription at a cost of $199 a year.

What is the Best Forex Trading Robot?

There is a multitude of Forex trading robots available on the market, particularly compatible with the MetaTrader trading platform. Reputable resources that verify robot performance include MyFXbook. We have also researched and created a list of the top Expert Advisors according to a strict set of criteria to help you undertake due diligence and make an informed decision to finding the best Forex robots to fit with your trading system.

At Axcess FX, we consider a low drawdown the most vital metric to gauge a robot. Drawdowns are the fall in the capital on your Forex broker trading account following losing trades in real-time trading. It is the calculation of the difference between the relative peak in trading capital and the relative trough in the capital and is represented as a percentage.

screenshot of verified performance data on myfxbook — **A screenshot of verified performance of a Forex robot on MyFXbook**

Final Thoughts and Conclusion

If you are new to Forex trading and are considering automated Forex trading software, try and build a knowledge base first, including defining your possible trading strategy and style.

Remember, experienced traders still want to maintain control and a more hands-on approach to Forex trading and use an Expert Advisor to identify trade opportunities as part of a trading system, with manual trade placement as a preferred step.

Related Resources

Forex robots compared to copy trading and Forex signals

Written by Chris Gillie

Do Forex Robots Improve Your Winning Odds?

If you trade Forex, you will know that timing is critical. A Forex robot can take the guesswork out of flaws in human timing, including emotion, by not only identifying trades but if you choose to do so the robot also automatically enters and exits trades with no manual intervention.

Trading Forex can be very exciting and profitable, but remember, it is a zero-sum game. For every FX winner, there is a loser on the other side of the trade. To be a winner, you only need to be right a little more than half the time.

As part of your broader trading system, can you expect to be a winner more than half the time with a Forex robot?

To help answer this question, it is crucial to undertake rigorous research before adding a Forex robot, also known as an Expert Advisor (EA) to be part of your trading system.

Once you have identified an EA to match your strategy, it is then vital to both backtest and undertake at least 50 trades with it to understand the statistical expectancy by forward testing in a demo environment before progressing the robot to real account trading.

Research is Key

As part of your Forex robot research, it is essential to consider the following points when considering adding a robot to your existing trading strategy.

Compatibility

Does the Expert Advisor’s underlying trading strategy align with your trading strategy?

For example:

Does it trade the currency pair or pairs that you already trade?
Are you a day trader using a scalping strategy?
Do you trade a particular session? If so, does a robot also generate trade signals during that session?

The Key Metrics for Evaluating Robots

To verify robot performance as part of your research, the robot developer must have verified performance data on a real trading account for you to analyze. Two essential resources provide this data, MyFXbook and FX Blue. Consider the following statistics as part of your research:

Profit factor

The profit factor can reveal whether a Forex robot makes money, and so is a crucial metric. The profit factor or PF displays the relationship between profit and risk, calculated by dividing gross profit by the gross loss on all trades. An EA with a PF of less than 1.0 should not be considered for selection as it will lose you money.

Risk-reward ratio

The risk-reward ratio is an indication of a Forex robot’s level of risk. A high risk-reward ratio indicates that a robot has a riskier strategy coded into its algorithm and should be openly questioned.

The golden risk-reward level of 3:1 is considered the benchmark to apply to a trading system where every $1 risked expects to see $3. It means that you could trade profitably with a robot that is only correct 50% of the time. Consider the below table that illustrates this point where if you only had winning trades 50% of the time you would still make an overall profit over 5 trades of $20,000 using a 3:1 risk-reward ratio.

Trade	Loss	Win
1	$2,000	$6,000
2	$2,000	$6,000
3	$2,000	$6,000
4	$2,000	$6,000
5	$2,000	$6,000
Total	$10,000	$30,000

Drawdown

Drawdown is an essential metric and represents the maximum loss percentage since the last high point on your capital trading account. It can be analyzed by studying an equity curve chart. If a chart has large peaks and troughs, it is an indication of volatility. A Forex robot with a high drawdown is not only volatile but also poses a higher risk. Consider robots with a low drawdown like Forex Flex EA represented by a steadily rising chart.

Maximum drawdown

This metric represents the robot’s maximum loss after the last high point in capital on your trading account. For example, a 60% drawdown indicates that an EA lost 60% of the trading capital value at one point. If it were to occur right after trading started, it would mean an instant fall of 50% in your capital account!

Average drawdown

Average drawdown is the comparison of several different drawdown amounts. If a robot has five drawdowns, adding them up and dividing by five gives the average drawdown. It will offer you an idea of the average loss size during a period of drawdown.

a forex robot looking at a currency chart

Backtesting is Vital to Verify a Forex Robot’s Results

Some Forex robots are programmed to be quite active and will put on trades several times a day. Others will trade less frequently, only when conditions are optimal. Some automated programs, such as Forex Diamond have a lengthy history of positive reviews, including our own, and long-term backtesting to confirm their validity – You can also look at the results obtained from recent live trades for confirmation on MyFXBook.

Best of all, you can link them to the MetaTrader demo account without risking real money. It should provide the necessary validation. If you are a new or a seasoned trader, a robot can help you become more profitable as part of a robust Forex strategy.

Statistical expectancy

It is essential to completely disconnect from whether your next trade placement makes a profit or a loss. If your underlying strategy has an edge, you do not have to be right even half the time to trade profitably. Statistical expectancy allows you to evaluate your trading system’s performance objectively by testing robot performance from fifty trades.

Forex robots allow 24/5 trading

There is a vast choice of automated trading software that allows robots to direct your trading through algorithms. Most are simple to install and get running, linking right into your online broker’s platform.

If your broker uses the MetaTrader platform, then automated software integration should be straightforward as most robot developers use the MQL language code of MetaTrader for scripting Forex robots.

metatrader 4 software installed and displayed on screen

Conclusion

Forex trading can be profitable and exciting. By undertaking extensive research and testing to get the right Forex robot trading for you, further reinforcing trade signals aligned to your strategy means guesswork is further reduced. The risk of trading outside the confines of your strategy through psychology also reduces.

For every side that there is a winner, there is also a loser. Which side would you prefer to be?

Written by Chris Gillie

Trading Forex in 5 Steps: The Dummies Guide

Forex is one of the fastest moving financial instruments meaning the Forex market is volatile and unpredictable and a daunting place if you do not know what you are doing.

As a beginner, you must accept that you will need to learn the basics. Here are the five steps required to start trading the Forex markets proficiently in our Axcess FX Forex trading for dummies guide.

1. Get a Basic Forex Education

Learn the basics. There are plenty of online guides, Forex tutorials, and courses available for those starting forex trading. Learn to trade resources are available online including Babypips.com, Investopedia and thebalance.com. Forex.com has excellent educational tools to help you trade, CMC Markets provides a highly recommended guide for beginners and Forex Mentor Pro offers a full suite of tools including live trading sessions to teach beginners how to become a profitable trader at an affordable price.

At the start, you need to understand the fundamentals of the Forex market, how Forex quotes work, and the major market participants.

Forex market fundamentals

Currencies like stocks can be freely traded. The key difference is currencies trade Over The Counter (OTC) between a buyer and seller and not on an exchange, like the NYSE as stocks do.

The Forex market trades around the clock, 24/5, throughout three major trading sessions: the European, U.S, and Asian session, centered around London, New York, and Tokyo. All three trading sessions overlap, providing 24/5 coverage from the Sunday evening Asian trading session until the U.S. trading session’s close on the following Friday evening. The London and New York trading session is the most liquid where spreads are the narrowest.

world time zone clocks for London, New York and Tokyo

How do Forex quotes work?

You cannot trade one currency in isolation; it needs pairing with another currency, creating a ‘currency pair.’ A currency quote reflects the first currency’s price in terms of the second currency in the pair. If GBP/USD (sterling versus us dollar, also known as Cable) is trading at 1.3500, it means that one GBP will purchase 1.3500 USD.

Currency pairs quote down to four decimal places. The final decimal represents the smallest increment that a currency can change in price and is known as one pip. Retaking our GBP/USD example, if the currency pair increases from 1.3500 to 1.3550, it means a rise of 50 pips, and a Forex trader will express the amount of profit (or loss) in terms of pips.

major currency pair quotes on an exchange

Who are the primary Forex market participants?

Before the advent of the internet, the foreign exchange market was dominated by predominantly institutional participants such as major banks, large international companies, central banks, and investment funds.

With the advance in technology, the retail investor has now joined the big players in the FX markets as online Forex brokers provide low-cost market access with tight spreads through their trading platforms. Retail foreign exchange is continuing to grow as small Forex traders take advantage of trading anywhere they have a device, whether PC, tablet, or mobile with internet connectivity.

forex trading online through a mobile device

2. Raise Your Knowledge to The Next Level

This second step should start to include learning about technical and fundamental analysis and an understanding of both manual and automated Forex software, including Expert Advisors and charting tools and packages.

This step also includes researching different types of strategies as the aim is to build your Forex education to a level where you can start to mold a trading style that plays to your strengths.

There are four broad types of Forex trading strategies, which are position trading, swing trading, day trading, and scalping. Position trading is taking a longer-term strategic currency position. Simultaneously, scalping is the shortest strategy with currency trades sometimes opened for just seconds to take advantage of only a few pips of profit.

Choosing a preferred strategy may come down to your character, with an analytical thinker choosing to use fundamentals as a basis for taking out a long-term view using position trading.

What type of trading style and psychology will you use

To gain all the essential knowledge to start trading, it is vital to watch tutorials, participate in online courses, and follow trading forums. Forums have developed useful ways of tutoring about the basics of currency trading for dummies and showing beginners instant trading results. Forex Mentor Pro has an excellent active member forum that you get access to when you sign up for an affordable membership and learn how to trade profitably. Forex Guy also has a good forum and Second Skies Forex offer a 12-chapter trading Forex for dummies course.

Particularly, when looking at forums, try and pay close attention to what successful Forex traders are doing and what you can take from their strategies and techniques relevant to you and from which you can mold a system around.

Below is an excellent video with a full online Forex trading course that lasts 2 and half hours. It is free to watch on YouTube and with over 5 million views over the last year, it is highly recommended.

3. Open An Account With An Online Broker

To trade Foreign Exchange, you will need an online trading account provided by a reputable brokerage. Any online broker selected should include the following considerations:

Consider an ECN broker

Ensure that the broker uses ECN (electronic communications networks) to give you direct access to other currency market participants. ECN brokers match trades between buyers and sellers and do not trade against their clients, instead passing orders to liquidity providers. ECN brokers provide the tightest spreads and only charge a fixed commission per Forex trade. Tight spreads are particularly relevant if you are adopting a scalping strategy.

Your chosen broker should use Metatrader

Chose an online broker that uses the MetaTrader 4 Forex trading platform (MT4). MT4 licenses to Forex brokerages who then provide the software to their retail traders. It is a flexible platform built on the MQL coding language employed by most Forex trading software that you may choose to use as part of your more overall trading strategy. It may include enhanced technical analysis tools or an Expert Advisor as part of an automated or semi-automated trading setup. MT4 Brokers include Forex.com, IG and Oanda

Only use a regulated broker

Not only are tight spreads, fair commissions, excellent customer service, and MT4 capability important when choosing a broker, it is also very important to ensure the broker is fully regulated.

If you are a U.S. based Forex trader, you are required to use a broker that holds full registration with the CFTC (Commodities and Futures Trading Commission). This highly respected regulatory framework safeguards investors’ interests by ensuring a broker maintains complete records, reports, and disclosure. To become CFTC registered, a broker needs to keep a substantial holding deposit with the regulator, meaning not all brokers can offer their services to U.S. currency traders. Investopedia has an excellent resource for comparing Forex brokers including those considered the best for US Traders.

Finally, a good demo account is also desirable, as that is an integral part of becoming a proficient Forex trader, and we cover this next.

4. Start Using A Demo Account to Dial In Your Strategy

As a novice trader, the first thing you should do is trade Forex using a demo account provided by your online Forex broker.

A demo account works in the same way as trading real money on your brokerage capital account. It will allow you to trade a theoretical amount in a live environment without putting your capital at risk.

Most online brokers do offer a degree of training on their platforms, including charting tools for technical analysis which is well worth going through as it will give you an idea of what you should be looking for on charts to complement your system for trading in Forex.

Demo accounts additionally serve to familiarize yourself with a broker’s electronic trading platform. When you trade with real money, you must be proficient with the order entry system, so you do not incorrectly enter a Forex trade and lose money.

forex trader analyzing a new trading system using a demo account

5. Integrate Forex Trading Software to Complete Your Trading Style

Once you are operating with a demo account, it will be essential to have at the very least a charting package. Some of the more basic charting software tools are free, and there is an annual subscription for others. It is best, to begin with, the platform’s free version provided to get a feel for how they work. You can then choose more advanced charting software packages such as TradingView, TrendSpider or Esignal offered on a subscription basis.

Automated software can also be a great option as part of a broader trading system. Using automated trading takes the emotion out of trading. You can use a pre-programmed Expert Advisor (EA) to identify Forex trends by following a set of rules and which then recommends trades based on any signal identified.

Some EAs, also known as Forex robots, will also place any identified trade directly onto the currency market without the need for human intervention. Automated software allows you to place trades automatically, meaning you do not have to be at your desk for long hours. The robot does the heavy lifting. Many professional Forex traders do, however, prefer to maintain an element of control by only using EAs to identify trades and then choosing whether to act upon them or not.

Read more about Forex robots in our detailed guide on how to find a profitable Forex robot to accompany your trading strategy.

a forex robot pointing at a chart on a screen

Go Live

Now you are ready to go live and start trading with real money. At this stage start with small trades and adhere to two principles:

Risk management

Make sure your money management system is strict, and do not trade with more than 1% of your capital. Combine this and always use a stop loss to avoid any significant losses.

Statistical Expectancy

Think about your overall trading strategy and statistical expectancy and not about individual trades. The aim over the long term is to trade using probability, and if you know your trades have a good chance of making a profit over the long run, individual trades are irrelevant.

We have two further written resources that provide more related reading to this article:

How to navigate to the journey to an expert trader

10 useful tips on how to trade Forex profitably.

Written by Chris Gillie

Is It Possible To Make Money Forex Trading?

Statistics place those that make money trading Forex at between 10% and 30% of all market participants. Whether trading personally or professionally Forex trading is not guaranteed to make you money.

So how do you make money in Forex? How can you increase your chances of success in one of the fastest moving financial markets?

Read on, and we will explain how.

How Can you Make Money in Forex Trading?

If you are a retail investor, Bloomberg report that research undertaken by Forex broker FXCM of its retail clients highlights that 68% of accounts had a net trading loss.

It indicates that one in three retail Forex traders did not have a loss on their account, but it does not give a glowing confirmation that everyone becomes rich from trading in Forex.

If you are well researched and disciplined, you can be one of the 32 % of traders who do not lose money trading Forex even going on to make a good income from the markets. Financial rewards can be substantial if you can differentiate yourself and become a skilled Forex trader.

How Much Can you Make Trading Forex?

A robust Forex trading system should win 50% of the time if you have the right trading conditions to undertake a sufficient number of trades. If you are day trading EUR/USD, it may prove challenging to find up to 5 suitable transactions a day if the market is trading in a narrow range.

Assume your strategy limits a losing trade to 6 pips and attempts to make nine pips on winning deals, and you have $10,000 capital in your trading account. 10:1 leverage with a maximum risk of $100 per trade (1% of $10,000), your leveraged trading position is $100,000. The maximum risk is $60 per trade (6 pips of $100,000).

Assume you trade EUR/USD five times a day on 20 trading days a month which is 100 trades a month

A 9 pip win = $90 per trade x 50 transactions per month = $4500

A 6 pip loss = $60 per trade x 50 transactions per month = $3,000

Your net profit is 1245 US dollars per month

image of a chart and money showing profit

Six Basics To Follow To Make Money From Forex

We have listed the following essential points that you need to adhere to make money when you trade in Forex and keep your your capital account stable.

1. Trade Forex less to gain more

Try and focus on the trades that will make the most significant gains rather than trading for its own sake. To do this, you must always be informed and alert.

2. Do not diversify

Stick to trading one currency or specific currency pairs and become an expert on it. If you are having success trading GBP/USD why would you start trading EUR/JPY

3. Understand compounding growth

Small gains compounded over time can produce some astonishing results. Consider the following. If you target a 50% annual profit, you can grow a $10,000 account into over $250,000 in under ten years

4. Make your stop loss into a stop profit

Always maintain your stop loss at its original level. Only move it up when the position is well in profit, but don’t trail your stops too close. Give that open position a chance to run.

5. Give your positions breathing space

Trading can be volatile. If you are after a significant gain give your trade breathing space with a stop-loss that takes account any market volatility

6. Limit risks but maximize your chance of success

Many traders lose money not by market direction but through unstable financial markets that take out tight stop losses. Consider buying in or at the money options to avoid getting stopped out rather than trading the underlying spot.

12 Ways to Avoid Losing Money in Forex Trading

It is essential to have a rigorous system in place to minimize losing money. Below we list the most critical areas of consideration to help reduce the risk of losing money.

1. Do your research

Do not dive in and trade if you have no underlying knowledge of the Forex markets. Here are the key areas to consider

Understand how foreign exchange works, including quotes and what factors affect it.
Will you use technical analysis or fundamental analysis?
Will you use manual or automated software?
Which domestic and foreign currencies or currency pairs will you trade?
What hours and which session (European, Asian, US) will you operate?

forex trader updating his trading journal with research notes

2. Use a reliable broker

Only open an account with a broker that is registered with both the CFTC and the NFA. A central issue here is making sure your deposit and funds in an account will be safe. Interactive Investors, Oanda, TD Ameritrade, IG USA and Forex.com are CFTC and NFA regulated brokers.

3. Make use of a demo account

Good brokers will have a demo account for you to use before going live. Make full use of this to practice getting familiarity with the broker platform, so order errors do not occur when you go live.

4. Begin with small trades and pre-plan

If you have had success with a practice account, it is a great start. When going live, a critical risk is emotion as real money is at stake. Trading in a small size will allow you to practice minimizing emotion, which is an unwanted part of trading. Emotional trading occurs when you do not pre-plan your trades.

5. Protect the downside

Always put a stop loss in place to protect your trading account. Foreign exchange is a fast-moving financial instrument. Unexpected news can move the Forex market and if you have a leveraged position without a stop loss, this could wipe out your cash.

6. Exit trades properly

If you are in a winning position, do not come out too early. If you are in a losing position, do not compound the damage. Try and minimize stress and emotion in your decisions.

7. Be aware of leverage

Leverage should be used with care when you are starting in Forex. Brokers can offer up to 50 times of leverage. If you have $5,000 in your account, a $250,000 position results from using 50:1 of leverage.

8. Do not trade for the wrong reasons

If a currency pair is not moving, do not enter a trade just because you are bored. Have a trading strategy in place for your trade.

9. Do not give up too easily

Getting trades wrong is normal. Even if you are having a bad trading day, try and keep to your daily trading limits and not quit because you are losing.

a forex trader has his head in hands in despair

10. Maintain accurate account book-keeping

Keep an accurate record of every trade. Having instruments traded, why you entered into a position, and the profit and loss to hand can help you identify mistakes and avoid doing them in the future.

11. The impact of tax

What is the impact of tax on your FX trading? Ensure you do not have any unexpected tax bills to pay from your FX trading. A tax specialist can also advise if your trading can be tax efficient.

12. Trading is a business

You do not become a successful FX trader overnight. Stay organized, set realistic goals, and treat every day as just another day at the office, whether you have winning or losing trades.

Key Takeaway

Can you make money trading Forex? The answer is there are no guarantees you will successfully trade Foreign Exchange. However, being organized, disciplined, and having a trading strategy in place will give you the best chance of being one of the 32% of retail traders that do not lose money in the Forex market. For further relevant articles we have written further tips on how to trade forex profitably and how to maintain focus when trading.

Written by Chris Gillie

What Are Forex Robots & How Do They Work?

There is a myriad of Forex trading strategies and styles. Traders of differing levels, from beginners to professionals, will have different ways of working. There is a divide between those who want to trade manually and others who wish to trade using automation.

Traders who go down the path of automation will need to undertake plenty of research to find automated software that matches their trading style and correctly carries out trades according to their strategy.

In this short article, we will explain what Forex robots are, how they work and how to identify the best Forex robot.

What is A Forex Robot?

To undertake fully automated trading, a trader will need to purchase or develop an automated Forex trading robot. A Forex trading bot, also known as an Expert Advisor or Forex EA, is computer software that uses technical signals to establish if a currency pair should be bought or sold at a point in time.

As part of an overall FX strategy, a robot helps take away the emotion out of FX trading. Emotions can sometimes result in currency traders opening trades that are not based on logical decisions or market analysis and out of line with an overall trading system. Psychology can amplify in fast or volatile Forex markets with the temptation to trade quickly.

The Mechanics: How Do Forex Robots Work?

Many Forex trading robots are built using the MetaQuotes, MQL scripting language used exclusively with MetaTrader Software. MetaTrader is a leading Forex trading platform used by many online brokers through which their clients trade, including major firms like Forex.com and Oanda.

The ability to integrate a robot with MetaTrader allows for the automatic generation of trading signals and order placement according to the trade indicators.

Forex robots are chiefly programmed to scan and interpret charts. Additionally, they can be programmed with specific parameters needed to make a trading decision; using Forex trading signals, they decide when it is appropriate to trade or hold back.

Forex robots work best when employed to trade specific currency pairs and use a defined range or time frame as part of an overall strategy. They are typically designed to make a certain number of pips within a trading range and can identify profitable Forex trades even in unstable markets, which has an unclear trading direction for a human. They can also follow a clear trend to maximize profits.

In Practice: Do Forex Robots Work?

Forex trading bots can be a useful tool to accompany your trading strategy, but it is essential to employ an EA correctly for full effectiveness.

Traders using robots should never entirely depend on them to undertake their full range of trading activity. Expert Advisors can carry out sophisticated tasks, but their functionality can be limited to how they were initially programmed. Forex trading still requires extensive human observations and research and digesting current news and economic developments that Forex robots cannot do.

a forex trader researches trading charts

Are Forex robots profitable?

Expert Advisors can generate strong profits by following short term trends within specific ranges and then identify the clearest signals on which to trade.

Long term trends, though, that can see Forex market conditions suddenly affected by adverse price movements are harder for robots to follow with the same degree of success; although more sophisticated robots with dynamic features are beginning to address this issue.

With how much can I start Forex trading by robot?

Forex EAs typically work with brokers that employ the MetaTrader platform. It is the minimum trade size specified by a Forex broker that drives the minimum size that can be placed for order execution using a Forex trade robot.

For example, Forex.com requires just $100 to open a Forex trading account and then has a minimum trade size of just 1000 units per currency according to the Forex.com website.

A Key Consideration Before Buying A Robot for Trading Forex

Ahead of buying a robot for Forex trading, perhaps the most crucial consideration is whether the Forex robot can trade profitably as part of your broader trading strategy.

The only way of really knowing is by researching for the right EA and then backtesting specific settings and demo trading before deploying it in a real-money environment. Most reputable robot developers like Forex Diamond, will offer a 30 day or 60-day money-back guarantee giving you time to test thoroughly.

An excellent video about automated & manual trading and how you can use a hybrid of both in a trading system

Identifying The Best Robots: Research is Essential

We have undertaken extensive research on the most important considerations to identify solid Forex robots. Through our detailed analysis we have created a guide of the best Forex robots on the market.

The guide provides full details, but as a concise summary:

First and foremost, you should always look for verified performance through real trading accounts. A reputable Forex robot developer will make this available on either Myfxbook or FX Blue.

It is essential when researching EA software to look for authoritative online testimonials and user reviews. Online trader reviews are also essential to determine the general sentiment for a particular robot and if the Forex robot trades profitably to improve winning odds. Dedicated review sites include Forex Peace Army (FPA).

Forex trading forums can also be a good source of feedback. MT5 Forum has a high degree of relevance for automated forex software. MT5 is the Metatrader platform forum, and as the majority of Expert Advisors are developed using the MQL coding language, you will find many references to robots.

Not only does extensive research need to be undertaken before deciding which automated software to use as part of your trading style or strategy. Once purchased, testing the software is vital to establishing statistical expectancy as part of your overall trading system. Testing can be undertaken both through theoretical trading using a demo account and backtesting.

Backtesting

Although backtests are available from a robot’s developer, there are reasons why you should do your own backtests ahead of any live trading.

Not many developers use modeling with enough accuracy to tell whether a Forex robot will perform well as part of your strategy. If you trade USD/JPY and are looking to make a nine pip profit with a six pip stop loss on every trade, if developer backtests do not include individual tick data, real-time spreads, commissions, or slippage, then automated software could actually lose money for you.

Many software developers use the Metatrader Strategy Tester, and as it only uses random bar graph data from the trading day, it is only considered 90% accurate. Developers that provide backtesting with 99.9% accuracy are using historical data with tools like Birt’s Tick Data Suite and offer much more credibility; however, if you are using a robot according to your strategy, you must still backtest according to strict adjustable parameters within the robot algorithms, to align any automated Forex to your trading system.

Here is a screenshot of a backtest employing 99.9% modeling accuracy:

What is the Best Forex Trading Robot?

Our detailed research on understanding the role of Forex robots values low drawdowns as the most important criteria for choosing a Forex EA. A robot algorithm generally employing a lower drawdown has a less volatile strategy and should give more consistent monthly performance.

Forex Diamond is the robot with one of the lowest drawdown that we have researched. We have undertaken a full review of Forex Diamond to complement backtesting and full performance results at the Forex Diamond official site.

The other EA we rate very highly at Axcess FX is GPS Forex Robot 3. It is one of the top 20 robots we have identified according to our ranking criteria. Its drawdown is within the parameters of 20% to 40% that is considered safe for an EA, but it is the sheer length of time of 8 years that it has been trading profitably on a verified real trading account that is so impressive.

Unusually for a Forex EA, it has been used by a Wall Street investment firm to trade profitably, and the results are available to view at the GPS official site. It is unusual because most large investment firms have their in-house quants (quantative analysts) and programmers and rarely use external auto trading software, preferring to develop in-house. Read our detailed review of GPS Forex Robot 3

Develop Your Own Forex Robot

Technically capable traders may consider building out their own Forex robot. The advantage of this is developing an automated system based on their own technical trading rules. Demo accounts that use MetaTrader allow for experimentation with MQL scripts, and after backtesting, it may be possible to develop a capable robot.

A simple example of a robot could be one designed for GBP/USD, where a trader has a strategy for take-profits and stop-losses following a technical break-out. A robot could be programmed with rules to place trades automatically rather than the trader making a manual order placement.

Final Takeaway

It is essential to remember that Forex trading robots work at their best identifying a narrow set of parameters to which they are programmed. They are a useful addition to a defined trading strategy but should not be used on their own as a stand-alone trading system.

Forex robots have, at times, received bad publicity due to their association with promises of guaranteed profits that have not materialized when used to trade in live markets. If, however, you do your research and undertake your backtesting, there are enough proficient robots out there to make a difference to your trading.

Written by Chris Gillie

Take the Easy Path to Forex Trading

The key to successful trading, if you are new to Forex, is having the basics correctly in place before trading with real money in live market conditions.

You must be well prepared to trade Forex as it is a volatile financial instrument for trading, affected by economic data, geopolitical events and major news announcements. Adding factors like leverage to the volatility, means an inexperienced trader without a trading plan has a reduced chance of success.

In this short article, we identify five steps that you can take, as a newcomer, allowing you to improve your chances of success from the outset.

Read on to find out how you can take the easy path to Forex trading!

1. Which Strategy Should I Consider?

Before you start trading Forex, it is essential to decide upon a strategy and not just enter the market blindly. Considerations should include:

Market analysis

Will you be more comfortable with technical analysis, fundamental analysis, or a combination of both?

Technical analysis is the study of charts and patterns
Fundamental analysis involves analyzing economic indicators and news events,

currency chart showing volatile charts and patterns

Trading style

Do you want to trade like a day trader, swing trader, or a position trader who takes long term positions? Day trading involves executing multiple trades every day; swing trading is holding trades for days or weeks and being a position trader means infrequent trade placement, instead focusing on trends over months and years.

Capital Availability

The funds you have available to invest will influence your strategy. Some strategies, like position trading require significant capital due to the need to hold a position long term with wide stop-losses. Other strategies like day-trading can be executed with a smaller budget, perhaps with low leverage as the aim is to make an overall daily profit with small profits on every trade.

2. What Currency Pair Are You Going To Trade?

Choosing which currency pair to trade is an important step on the easy path to Forex trading.

Some currency pairs like Cable (GBP/USD) are both volatile and liquid. They are well-suited for day traders looking for intraday profits as there is sufficient daily movement and there is good liquidity meaning tighter spreads and less slippage, which affects the paper thin profit margins of short-term traders.

Other currency pairs like USD/JPY are noted for being more stable. They have an inclination to follow long term trends which are suitable for position traders placing long-term strategies.

Whether it is GBP/USD, USD/JPY or another currency pair, it is important to follow them ahead of live trading until you have a good feel for price action and understand how they react in certain market conditions and to your selected technical indicators.

You will need to use charting software as part of your overall FX strategy, either a solution that is provided on your broker platform, or a stand-alone charting solution.

3. The Importance of Technical Analysis and Charting Software

Technical analysis is a vital skill to learn as a Forex trader. Presented visually, in the form of line, bars and candlesticks, charts supply price data on what is happening to a specific currency pair, and in most instances, the fundamentals reflect in the charts.

A widely held view is that a currency trader is only as good as the charting software they employ as part of a trading system. There are excellent stand-alone charting software tools on the market, and many can also plug straight into your brokers’ electronic trader platform, allowing trading placement straight from charts, with straight through broker trade execution.

Charting software is available to suit all trading styles and is an integral reason for the growth in popularity of online Forex trading. From manual charting software, to tools where you can code your own indicators and algorithms, the choice can appear overwhelming.

Good charting software includes:

Trendspider, an AI-powered technical analysis tool to efficiently navigate and trade on the market
TradingView, which is one of the best cloud-based charting software for access from anywhere
eSignal is a software tool that uses multiple data vendors to give some of the best historical data analysis for strategy testing

For more information on the best technical analysis software including TrendSpider and TradingView, we provide more insight in our detailed guide on the best Forex charting software for traders, researched according to strict criteria to provide the best options out there for all trading styles.

An overview video of technical analysis – Charting patterns for beginners

4. Practice With A Demo Account

As a beginner, ahead of trading live, you should test prospective strategies in a simulated trading environment. Most online broker companies will allow you to open a demo account, without committing to trade through a live brokerage capital account.

Trading in a simulated environment is called forward testing. It allows you to trade safely any strategy that you have backtested using the historical data available through the backtester tool of your chosen charting solution. By forward testing a strategy through multiple trades that have already back tested successfully with historical data provides confirmation of the statistical expectancy ahead of trading live with real money at risk.

5. Ensure A Smooth Transition To Live Trading

The final step on your easy path to Forex trading is a smooth transition to live trading. Having successfully backtested with charting software, and forward tested your strategy on a demo account, there is the temptation to dive head first into live trading.

Good practice, however is to start small. Begin trading with a smaller trading size than you intended from the outset. It will help reduce psychological pressure and get you used to trading with real money as there will be an emotional difference, where the fear of losing real money can affect your decision making.

Try and also replicated the demo conditions as closely as possible in your live account, particularly risk management around tight stop-losses and keeping to the correct trading frequency by not over-trading.

a dial from low risk to high risk around risk management

Our Takeaway

In our five steps on your easy path to Forex trading, we identify that analysis will always be an essential element of your Forex trading strategy. If technical analysis is your chosen route then integrate the best charting software you can find as:

The quality of data not only affects backtesting but has a knock on effect on forward testing.
A greater likelihood of low latency when using direct broker trade execution straight from your chart.

Related Resources

Written by Chris Gillie

What is Forex Charting Software?

Forex charting software is a computer program which helps Forex traders compare the price of currency pairs using different trading indicators. The most popular technical indicators include moving averages, Bollinger bands, Fibonacci retracement and relative strength index (RSI).

The practice of studying charts and patterns is known as technical analysis and has long been used by traders to analyze the currency markets and find indications about the future performance of a currency pair.

Identifying trade signals and price patterns may seem confusing at the beginning. There are excellent online courses, tutorials, and books on technical analysis essential for those learning charting as part of their trading education. To help you quickly identify the best Forex online learning resources including charting, you can read our Axcess FX article, the 15 best resources to learn Forex online.

Charting Software As Part Of A Trading Strategy

Charting software helps traders undertake technical analysis and is a vital tool in implementing a successful Forex trading strategy.

Focusing on one specific trading approach using charts and implementing it into a disciplined strategy is recommended.

Simulated paper trading can be employed to help traders understand how technical trading indicators identified as part of their strategy behave in live markets. From charts, beginner traders may choose to paper trade a simple crossover strategy tracking two moving averages on a currency pair.

Seven Key Advantages Of Using Forex Charting Software

We have identified seven of the advantages for using Forex charting software. They are not in order of importance, but looking through them will make you aware of the benefits.

A visual representation of market data: It can be challenging analyzing market data to identify potential trades. Charting software though, offers a clear visual representation of trends, patterns and price movements.

Real-time data and analysis: Forex trading software can provide live price feeds to charts, analytics and market data which is crucial for permitting traders to make accurate decisions from up-to-date market conditions and trends.

Historical data analytics: As well as live data, charting software enables Forex traders to access historical data that:

Allows predictions based on historical price movements
Identifies recurring patterns
Reviews previous market behavior

Historical data is also used by Forex traders for backtesting and strategy testing.

Customizable technical indicators: Using Forex charting software means popular technical indicators like RSI and Bollinger Bands can be added on to charts and customized to align with specific trading strategies, facilitating decision making.

Advanced drawing tools: Advanced drawing tools available through charting software allow Forex traders to mark price points, create visual analysis and forecast possible reversals. Chart drawing tools include:

Trendlines
Fibonacci retracements
Channels

Alerts and Notifications: Specific price levels can be set up with an alert by FX traders using charting software. Once an alert is activated, traders are notified when set criteria are met, for example a moving average cross over or divergence (MACD). A trader can then take any necessary action without constantly monitoring the market.

a trading alert comes up on the trader's phone

Multiple time frame analysis: The seventh advantage of using charting software for Forex trading is the ability to analyze charts on multiple time frames. Time frames range from minutes and hours to daily and weekly.

Analyzing different time frames allows traders to get a broad perspective of current trends and hone trading strategies to preferred short term or long term goals.

If you are at the beginning of your charting journey, you may find the below video on how to read charts fast, useful to get you on the right path:

Should You Invest In Paid For Charting Software?

Most online Forex brokers offer free charting software to support your trading activities when you open an account on their Forex trading platform. The MetaTrader platform, which is popular with online brokers, offers free charting software.

There can be limitations to using free chart software however, like a limit on live data feeds or reduced access to strategy testing. Many traders, therefore prefer to use their own charting software purchased independently rather than that offered by their online broker.

If you are thinking of investing in independent Forex charting software, it is vital to first read online reviews to get informed independent feedback before committing. We have a detailed guide where you can read further about the benefits of reviews and how they will help you decide on the appropriate charting and technical analysis software.

What Constitutes Good Charting Software?

Proper technical analysis focused software should have interactive charting features allowing you to work to implement a charting strategy as part of your broader trading system.

Features must include technical indicators, including moving averages and oscillators and also patterns such as shapes and trendlines. Charts will include bar and candlestick charts and opening and closing prices. Time frames vary from a minute up to multi-year intervals. Traders usually employ candlestick charting as it displays the broadest amount of data.

The following software development companies offer good FX charting software:

MultiCharts
eSignal
Trend Spider
Trading View
MetaTrader Charts

We have an informative resource that looks at the best charting software that will help you further make an informed decision on the best option for you.

Takeaway thoughts

In this article, we have provided a high level overview of what is Forex charting software, including its advantages compared to not using it, what constitutes good charting software and whether you should invest in a paid rather than free solution.

If you are considering purchasing charting software, make sure it has useful support features, including guidance and support for trading on the Forex market, and the possibility to ask questions about using the software’s features and technical support, through either chat, email or voice.

Written by Chris Gillie

Chris Gillie is the founder of Axcess FX, a Forex software research and review website. He is a former investment banker who worked in FX Sales on the UBS London trading floor. Chris has been using Forex trading software as part of his trading set-up since the late 2000s and the embryonic days of MetaTrader and the MQL coding language.

10 Forex Tips and Tricks to Help You Trade Profitably

As with all forms of trading, making money in FX is about having a trading plan that you have the discipline to follow. You must know your entry and exit points. Risk and reward must weigh up before you enter a trade.

Here at Axcess FX are our 10 top Forex tricks and tips to put you on the right path to trade profitably.

1. Get a Forex education

Forex trading carries the risk of losing your capital. To manage risk, put in place a working strategy, and avoiding significant losses requires solid FX knowledge. If you are committed to starting forex trading, tip number one is to get a good Forex education.

From a basic understanding of how currency pairs work, you will want to learn how to analyze the market using fundamental and technical analysis and understand trading signals, trading tools, instruments, and study price action.

Beyond immersing yourself, online courses hosted or written by respected industry figures are essential. It is vital to learn the right way. They are also convenient for those that are in employment. UBS, the world class investment bank offer a one-day Forex course either as a classroom or virtual program which you can find out more about at their research academy.

Continuous education is also a necessity for experienced traders. Strategies may need refining, and keeping abreast of market and technological developments is essential. As an accompaniment, here is our useful article on the five steps needed to trade Forex.

2. Carefully research your broker

A myriad of online brokers exist. Choosing one can be time-consuming and confusing. Taking account of the following is essential:

What trading platform and software does the broker use?
Are you likely to use automated software to trade?
Will this software be compatible with broker trading platforms?

It is critical to choose the right trading partner as you engage in the FX market since price, execution, and the quality of customer service can all make a difference in your trading experience.

Remember, if you are a US resident, you will need to use a CFTC registered Forex broker such as Forex.com, TD Ameritrade, Interactive Brokers, Oanda or IG USA.

3. Select a consistent strategy and goals

Once you have a Forex education, find a trading strategy, and stick with it to discover your trading style. FX Strategies range from the very basic to the very complex and from the aggressive to the conservative. Every trading style has a differing risk profile and a different approach for the strategy to work.

Are you a position trader where you have the funds to take a long-term strategic trade?
Are you a day trader due to limited funds and need to trade daily to make a profit?
Will you be a disciple of technical or fundamental analysis or a bit of both?
If you trade short term, consider a scalping strategy that requires instant decisions in the space of one trading period.
Are momentum or reversal strategies a consideration?
Are you a chartist and will trade with a moving average or Fibonacci strategy?
What is your risk tolerance? How much leverage will you use?
Will you trade using automated software, or do you prefer to trade FX manually?
What currencies or currency pair(s) will you focus?
Will you margin trade or make use of CFDs?
What is the volatility of the currencies you want to trade as this will affect the strategy

Here is an excellent video detailing a simple profitable trading strategy

4. Use discipline and risk management

The management of your capital account is key to your success as a trader. Ensuring through appropriate stops that you trade with 1% to 2% of your capital at any time is essential if you want to last in the foreign exchange market. Every trade has an element of risk, and risk management will keep you trading for longer.

A lack of discipline can result in excessive trading losses, which can put you out of the game.

Panic and greed often blight the early stages of a Forex trading career. Controlling all emotions through risk management and recording it in a journal is excellent control overtaking a specific trading action.

Rules, discipline, and experience are critical in Forex trading. We have also written a dedicated article on how to further maintain focus and discipline when trading forex.

5. Create an intense work ethic

One of the most crucial forex trading tips is a strong work ethic which means that you prepare well for every trading day or week through solid research.

It means accepting that sometimes you may not feel like it but must take progressive action to improve continually. If you are trading through automation or mechanically, this may involve back testing your software or exploring new Forex trading strategies.

an FX scalp trader back testing his software

6. Accept losses

Look at the bigger picture and never obsess over having a high win percentage. Any loss should be easier to accept by limiting your trade exposure to no more than 1 or 2% of your capital. If you cannot take a loss, you will never be a profitable trader. Self-improvement and learning from previous mistakes build your character as a Forex trader.

7. Maintain a trading journal with weekend analysis

If you do not trade with discipline, you may be susceptible to revenge trading. A significant loss can trigger ill-disciplined traders to open up a new position with no strategic thought acting purely on emotion.

Operating a trading journal is essential, as successful currency traders are also accurate record keepers. It is vital to evaluate your trading performance continuously.

Note keeping should include:

Entry and exit conditions of all trades
Support and resistant levels
Target levels for each trade
Daily ranges

With meticulous note keeping, a journal helps to evaluate why you made losing trades and to monitor the ongoing performance of your trading strategy. It also flags up any inconsistencies with trades being out of line with your Forex trading strategy.

A journal can also be a printed record of an underlying chart if your strategy uses technical analysis. Entry and exit points and emotions at the time can record on the chart.

Our top trading trick

Evaluating your journal at the weekend is a useful tip. The Forex markets are closed, and it will not interfere with your weekday trading and may allow you to be more objective; remember during the weekend you are more likely to be calmer than in the cut and thrust of a trading day.

8. Positive feedback loops

Essential for building confidence, positive feedback loops are proven to work—trading according to your underlying strategy and executing well a pattern of positive feedback forms. Success builds confidence, and the more times you have winning trades in your chosen strategy, the more significant the positive feedback loop.

9. Carefully consider entry and exit points

Forex traders continually blight by conflicting information on charts of different time frames. A selling opportunity on a weekly chart may reflect as a buy signal on a daily chart. Make sure you synchronize a daily chart to time the entry against a weekly chart displaying trading direction. Only sell when you have a sell signal on both time frames.

10. Do not overtrade and take regular breaks

If you are over-trading the Forex markets, it is usually an indication of two underlying issues that may even be happening at the same time:

You are likely to be risking too much capital with every trade.
Your trading frequency is too high relative to the trading session.

Overtrading can harm your capital account. Trading Forex can be draining, and if trades are not going your way, a tendency is to spend long sessions in front of a computer looking at multiple screens that are central to a trading set-up.

To counter this, take regular breaks. It is vital to try and keep sessions uniform and take frequent breaks away from trading Forex and collect your thoughts. Only return to your trading station once you are feeling refocused.

a trader goes running during a break from trading

Bonus Tip

We have highlighted ten Forex trading tips and trading tricks that experienced traders use to profit from the Forex market successfully. However, the ability to trade FX profitably depends on having substantial knowledge and a rigorous Forex trading system in place. Emotion is the bane of traders, especially those new to the market. By eliminating it through discipline and rules is a solid base on which to perform.

Many top traders deal with emotion in different ways. Our final tip is to use meditation techniques before your trading day to start trading in a peak emotional condition.

If you are interested in further trading insights we have written an article on Forex trading tips and one on how you can make money Forex trading.

Written by Chris Gillie

Seven Short Forex Trading Tips

There are so many fundamental Forex trading tips that you will be aware of and try and take on board when you begin Forex trading. If you start out doing the basics correctly you will have an improved chance of success.

In this short article, we have included seven short Forex trading tips for newcomers that cover off the basics and will provide you with value for your future trading endeavors. Remember, many new traders go on to make a good income from their FX trading activities and so why should you not be one of them!

1. Your trading style should reflect your personality

Your chosen Forex trading style should align with your personality, as trading involves making decisions under pressure and requires significant risk management to limit potential losses. By aligning your personality with your trading style will lead to improved performance, consistency and discipline

Factors to consider when you are trying to match a trading style with your personality include:

Lifestyle compatibility

Lifestyle is a factor that will impact on the style you trade. A short term trading style, like scalping or day trading is unsuitable if you are trading around a full time job. Instead, swing trading or position trading will be more appropriate.

Emotional control

Forex trading can be an emotional roller coaster and by trading according to your personality is more likely to see you keep control under pressure. For example, following a long-term trading strategy will better suit calm and patient traders rather than an impulsive trader, who is looking for greater trading activity.

Natural decision making

Some Forex traders are very analytical and are driven by data; whereas other traders rely more on intuition. Your style of trading should allow decision making in the way that feels the most natural to you.

2. Never over trade

You should only trade in amounts and frequency that you are comfortable with until you are completely confident with your ability to trade Forex. If you over trade it may have a negative impact in the following ways:

Mental exhaustion

By over-trading you can become susceptible to mental exhaustion, especially in short term trading strategies. It can result in decision fatigue where the quality of trading decisions will gradually decrease with the more decisions you have to make. Over the course of a trading day or trading week, the negative impact of over-trading could really start to impact on you.

The lack of a strategy

When you over-trade it is an indication that you lack a solid trading strategy or the discipline to adhere to one. The absence of a coherent strategy turns your trading efforts into gambling rather than calculated risk taking.

Revenge Trading

After suffering a significant trading loss, ill-disciplined traders may try and get their ‘revenge’ on the market by placing trades with minimal rationale behind them. Such a reaction can result in a vicious cycle of further losses and over-trading

3. Let a winning trade run

To trade Forex more profitably, once you have a winning trade, there are increased benefits from letting the trade and profits run:

Overcome the fear of missing out

The fear of missing out, also known as FOMO, can see traders jump into trades without proper analysis. Through letting winning trades run, traders can offset the negative mindset of missing out on other trading opportunities.

Efficiency of time and resources

The time and effort to manage a large winning position is no different to that of managing a small position. If you let winning trades run, it is a more productive use of both your time and resources.

Improving your risk reward ratio

Having a favorable risk reward ratio is fundamental to successful Forex trading. When you let a winning trade run, the potential reward increases while the initial risk remains the same; assuming you are moving your stop-loss up to break even.

4. Cut your losses quickly and accept them

By cutting losses quickly by letting a losing trade stop out and accepting it is fundamental to being a successful Forex trader. There are a number of reasons the practice is crucial:

Capital account preservation

In our article why FX trading requires strict money management, we identified how small losses of 2% of capital can be recovered quicker than larger losses. Remember that a 25% loss on your trading account requires a corresponding 50% gain to break even!

Avoid the “sunk cost fallacy”

The sunk cost fallacy in trading is the belief of continuing with a loss-making trade due to the time and money already invested, despite the risk of potential losses outweighing the benefits. By cutting losses quickly on a badly performing trade, Forex traders can avoid any fallacy and trade in the present and not the past.

Opportunity cost

By holding on to losing trades may tie up capital from your trading account that could be deployed to better trading opportunities. By cutting losses, traders ensure that their capital is free for fresh trades.

5. The trend is your friend

The old saying is “the trend is your friend,” anchors one of the central principles of technical analysis. The saying implies that Forex traders may improve their chances of success by trading in alignment with the current trend. When trading currencies, there are a few reasons why this principle has relevance:

Momentum

A trend is an indication that momentum lies behind a currency’s price movement. By placing trades that move with the trend, traders are seeking to capitalize on the momentum, which increases the chance of the trade making money.

Filtering out noise

The FX market is susceptible to random price movements or “noise” which can lead to false trading signals. By trading with the trend can help filter out noise and allow focus on more substantial price movements.

A higher probability of success

Forex trades placed in the trend direction usually have a higher probability to succeed as they go with the momentum of the market rather then against the flow.

Here is a very informative video giving further Forex trading tips for beginners

6. Always keep to the rules

An inexperienced trader will feel tested to the limit in times of high volatility. When the spot moves rapidly, losses can occur if a trader does not stick rigidly to the rules set out in their own trading system which includes:

Consistency

Adhering to a ruled based trading system creates consistency in your trading approach. By following a robust set of guidelines allows for accurate assessment of a strategy’s effectiveness and to make adjustments as necessary.

The 2% rule

It is best practice in Forex trading to place no more than 2% of your trading capital on a single trade. As the forex market is so volatile, keeping to the rule can help traders navigate through periods of high volatility by avoiding panic decisions through predetermined actions. Losing 2% of your capital is easier to recover than an ill-disciplined trade that loses 25% of your trading account.

Performance evaluation

If you are trading within a wider trading system it makes it easier to evaluate your trading performance. If trading results are lackluster, you can look back at your trading rules to pinpoint what is likely working and what isn’t.

7. Keep a trading journal

A trading journal is essential and the best traders are those that keep detailed records of trades so that they can review them at any time for different reasons:

Goal-setting and tracking

Trading journals are a good way to set trading goals and track any progress towards them. The process helps maintain motivation and keeps your trading aligned with original strategy objectives.

Accountability

A journal will hold you accountable to your underlying trading system and strategies. It makes you question the reasoning behind every trade, helping to prevent irrational trading.

Learning and improvement

Trading journals are learning tools. Through writing your thoughts behind every trade, and comparing the expected outcome with the final result provides insights into trading processes and decision making. With the information at hand for analysis, it will help lead to continuous trading improvements.

For further Forex tips please read this additional guide that we have written that will hopefully help you to trade profitably.

Written by Chris Gillie

Additional Resources