Know what moves currency markets.

Like any asset class, there are a number of factors that drive Bamboo Alerts. A country’s macroeconomic situation can have a major influence--economic data releases, policy decisions, and political events can change an economist’s outlook on the country, and therefore its currency. There are also technical factors such as interest rates, equity markets, and international trade, which may also have an impact. Spend time getting to know these.

Understand the strategy adopted by Bamboo Alerts.

As a trader, you need to be aware of three crucial trading strategies, which are often used by currency traders: the carry, momentum, and value trade. Momentum tracks the direction of currency markets; the carry strategy sees investors selling currencies with low interest rates and buying those with high rates; and the valuation strategy takes a position based on the investor’s view of a currency’s value.

Decide on your trading strategy.

In currency trading, as in any form of active investment, it is important to understand how you arrive at your investment decisions. Are you someone who looks at the big picture (fundamental economic data such as inflation, or central bank decisions) and makes a call on how that may affect a currency pair? If so, then you’re macro-driven. If you are someone who looks at the changes to a currency pair and then tries to understand what this may mean from a macro-perspective over the long term, then you are a technical investor. Bamboo Alerts are created by addressing both these disciplines.

Manage risk.

As with any investment decision, you must decide how much risk you’re willing to accept. Ask yourself, “how much am I prepared to lose acting on this Bamboo Alert?” If you don’t have a convincing or comfortable answer then you should rethink the signal. Do not risk more than you can afford to lose. Think about how you can mitigate your downside risk; make use of trading strategies such as stop losses or limit orders.

Stick to what you know.

There are 13 currency pairs that can be traded using the overview provided by Bamboo Alerts, each of which have their own characteristics and considerations to understand and analyze. If you’re participating in the market on a part-time and non-professional basis, it is probably better to concentrate on just a few pairs and commit to thorough and robust research on those, rather than superficial research on the many. Some key things to consider when analyzing a currency pair are its liquidity, transaction costs (the spread), and volatility. As a general rule, major currencies usually have better liquidity, tighter spreads, and lower volatility, versus emerging-market currencies, which have poor liquidity, wide spreads, and volatile movements.

Plan your trade, and trade your plan.

If you fail to plan, plan for the failure. It is one thing to have a plan, it’s quite another to execute it. When trading currency, it is important not to get caught up in the moment, the markets are fast moving and in the short-term can be unpredictable.

Research, research, research.

It’s important to stay current. All currencies move quickly, so checking the price once a week is not going to help you make strong, long-term returns. It is helpful to use a mobile device such as a Blackberry to keep you in touch with the market. The Bamboo traders use mobile communication equipment to constantly assess their trading positions.

Keep your emotions in check.

Like many important decisions, it is vital to keep emotion out of any trading decision you make. If you’re upset about missing out on a Bamboo Alert and want to trade yourself into a better position, or want to stray from your trading strategy to make up for a loss earlier in the day reconsider, because you’ve got the warning signs of someone about to make an impetuous, irrational decision. If you do feel yourself getting emotionally involved in a particular trade, take a deep breath, review your strategy, and establish how such a decision will affect your overall approach before going anywhere near the "execute" button.

Don’t expect to win on each alert.

The most successful of traders don’t win on every trade. What they do have is a robust plan and long-term strategy, which carefully considers the risks. So don’t necessarily be disheartened if an alert does not immediately go your way; review why it went wrong and see if there is anything to learn from the experience. But don’t think that currency trading is an option for those seeking quick money, because like any investment, it only should be played by those with a long-term goal in mind.

Don’t put all your eggs in the currency basket.

Foreign exchange is only one of the many asset classes you should be considering as part of a balanced investment portfolio. Forex trading is not suitable for every investor, so if you are committing all of your financial resources to forex trading, be sure you are fully aware of the risks and rewards of doing so, because commitment to one asset-class is not recommended. The same applies for currency trading itself. Risk diversification allows you to mitigate your risk by spreading it out, that is, not placing all your faith in a single trade. Diversification is key, no matter what asset class you’re investing with.