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The Ultimate Forex Trading Checklist: 5 Essential Steps Before You Start Trading

Before you dive into the fast-paced world of forex trading, it's crucial to have a roadmap—a checklist that ensures you're prepared for what lies ahead. At Logikfx, we understand the importance of preparation and education in trading success. This article serves as your ultimate guide, answering vital questions and integrating Logikfx's advanced tools to help you navigate the forex market confidently. Here's what you need to check before starting your trading journey.

5 steps before you start trading

Logikfx's Ultimate Forex Trading Checklist

1. Solidify Your Trading Plan

Do You Have a Trading Plan? 

Before you even open your trading platform, pause and ponder your strategy. Questions like "What will I do if the price doesn't behave as expected?" or "Where should I place my stop loss?" are critical. A well-thought-out trading plan addresses these questions, guiding your actions and helping you manage trades effectively, minimising emotional decisions. Remember to write down your plan, keep it nearby during your trade, and stick to it - a plan is only valuable if you follow it.

Logikfx Solution

Take advantage of Logikfx's FREE Online Learn To Trade Lesson, as well as all of our other educational resources. Our platform offers tools and articles that help you refine your trading plan, ensuring it's robust and tailored to your goals.

2 forex and stocks books

2. Assess Market Volatility

Is the Market Volatile Enough? 

Movement is the lifeblood of trading. Without volatility, profit opportunities dwindle. Before trading, check the market's pulse—economic indicators for news events, trading volumes, and market openings are your go-to indicators. News events can really shake things up, keep in mind most trades happen at the opening of a market (Sydney, Tokyo, London, and New York). Try to trade around the opening as this will give you more movement, and therefore more opportunities!

breaking news and stopwatch graphic

Logikfx Insight

Our Economic Indicator keeps you ahead of market-moving events, while our analysis tools measure market sentiment and volatility, ensuring you're trading in an active market. Be sure to check out both before you begin your trading journey. Download Apple's handy Market Countdown App to help stay in the loop.

3. Understand Correlations and Utilise Currency Strength Meter

Did You Check the Correlation? 

Understanding the interplay between different currency pairs is a cornerstone of effective forex trading. Correlations can significantly impact your trading decisions, influencing both pair selection and the timing of your entry and exit strategies. For example, trading a weak currency against a strong one may increase your chances of a successful trade.

Incorporating the Currency Strength Meter into Your Analysis

  • Positive and Negative Scores: The Currency Strength Meter often displays currencies' strengths as positive or negative scores. A positive score indicates a strong currency, suggesting it is performing well against its counterparts. Conversely, a negative score signifies a weak currency. Understanding these scores helps you identify potential trading opportunities by comparing the strength of various currencies.

  • Logikfx Advantage: Leverage the Logikfx Currency Strength Meter or the FX Meter App to grasp market correlations in real-time. Our comprehensive educational resources, including webinars on correlation and our informative blog posts, empower you to use this knowledge effectively, enhancing your trading strategy.

example currency strength meter

By integrating the use of the Currency Strength Meter into your correlation analysis, you gain a more nuanced understanding of the market. This allows you to make more informed decisions, selecting pairs that are more likely to move in your favour based on the underlying strength or weakness of their respective currencies.

4. Know Your Spread

How Big Is Your Spread? 

Forex Spread is the difference between the Buy and the Sell price of any given asset (varies with every broker). Spreads can eat into your profits and should be part of your risk assessment. Always be aware of your spread, especially during news events or off-hours, to ensure it aligns with your trading plan. The size of the spread can be influenced by different factors, such as which currency pair you are trading and how volatile it is, the size of your trade and which provider you are using.

Calculate the cost of Spread with Logikfx

To calculate the cost of spread you will need 2 things...

  1. The value per pip of your trade

  2. Your lot size

To figure out the total cost, you need to multiply the value per pip by the number of lots you’re trading...

So if your lot size is 1 mini lot or 10,000 units then your value per pip will be $1 for every pip that your trade moves...

then its the simple task of multiplying these together to get your transaction cost using the equation below

how to calculate spread examples

5. Calculate Your Maximum Risk

Did You Calculate Your Maximum Risk? 

Protecting your capital is paramount. Always decide how much of your account you're willing to risk for each trade - the industry recommends between 1 and 2%, use a calculated stop loss for every trade. Remember, successful trading is not just about making profits but also about preserving your capital.

Logikfx stop loss calculator