Dear reader,

For today’s edition of MoneyMorning, I asked international currency expert Michael Sankowski’s to share his expert tips to mastering the currency market.

Today, he discloses six secrets to trading like a pro on the forex market. So without further ado, here’s what Michael Sankowski had to say…

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Six expert secrets to mastering the forex market…

By Michael Sankowski

The first step in mastering the currency market is knowing which currencies to trade.

The best currencies to trade

The best currencies to trade are those of the countries with the largest and most economically advanced economies in the world. Not only are their currency markets the most liquid on the planet, a vast majority of currency trading happens in the majors, so I recommend trading these currencies first – these include the likes of:

•    US dollar
•    Euro
•    Japanese yen
•    British pound
•    Canadian dollar
•    Australian dollar

Which currencies to avoid

In the beginning, avoid trading any currencies outside of the major currencies. They’re known as exotics and have a tendency to crash without notice. To avoid losing a ton of money, avoid the exotics. Of course, that doesn’t mean you should trade the rand against one of these major currencies – you should. But you need to know what you’re doing to make it worth your while.

How to evaluate how much to put in each trade

This is among the most important topics in trading. Most people risk far too much in each trade. Many professional traders risk 1% of their capital per trade – it’s the way to insure that you always have capital on hand to make another trade. I recommend putting less than 5% of your trading captial in each trade. Even with this level of risk, be careful.

How to enter a position for maximum gains

The best way to enter a trade is when it meets several criteria for being a successful trade – not only one or two criteria. When a trade has fundamental and technical support, short- and long-term sentiment, as well as momentum going for it, the odds of a successful trade go up dramatically. Situations like this happen frequently in the currency markets. When they do, large gains can be made.

How to track your trades in just five minutes a day

Many people fall into the habit of “checking” the markets constantly. They’ll pull up prices on their computers, pull up short-term five-minute charts and watch the market move trade by trade. Please don't do this. It doesn’t help your trading at all – it may even be counterproductive.

The truth is, you can’t make the market go your way any faster by watching it closely and obsessing over the markets doesn’t help you make objective decisions about making trades. Of course, you’ll want to watch your trades, but watching them too closely doesn’t help.

I recommend checking the markets every morning for just a few minutes, getting on with your life during the day and then checking them again in the evening. You don’t need to do anything more with the markets.

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The WORST day of the week to enter a forex trade

Saturday is the worst day to enter a trade. The FX markets are always open, but at different times of the week, there are different levels of liquidity. During the working week – that is, from Sunday night (Asian Week Open) to Friday at 5pm ET (Eastern Time)– the markets are liquid. As a result, the prices you get on trades are reasonable.

But on Saturday and Sunday morning, the markets aren’t liquid. And on many Forex platforms, you can still place a trade. You’ll get a terrible price – and make some bank trader overjoyed as he rakes in the bucks – but you can place a trade.
This is why I avoid trading on the weekends, Saturday in particular.

How to exit a position for maximum gains

The secret to exiting correctly is in sticking to a system. When you have clear profit targets backed up by research, exiting becomes easy.

Trading is as much about the exits as the entries. Having a great trading idea or a great entry to a trade is exciting, so many traders don’t focus on the exit when they have an open profit. But the exit is how you put money into your account.

I put profit targets on my trades, but I also have fundamental reasons for trades. If the fundamentals of the trade change in a negative way, I’ll get out before it reaches the profit target.

It’s important to know that traders have been making money for centuries. There will always be another opportunity to make money in the markets, so take your profits, stick to the system and wait for the next good opportunity.

Until next week…

Here’s to your financial freedom,

Karin Iten and Michael Sankowski

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