7 Rules of Successful Forex Traders
The only way to make money in forex trading is to avoid making emotional decisions and follow a carefully thought out trading strategy that takes the current market and history into account.
Never risk any more than you can afford to lose. You will lose money, all traders do, so make sure you’re not losing anything else important in the process.
Never risk any more than 2% of your margin trading account on a simple trade.
For mini account holders, 2% of $300 would be $6 so realistically you would need around $15 so you can make this 5%. As soon as your account size is big enough, make this 2%.
Always use a stop loss order.
If you haven’t figured out where your stop loss order and limit order should be at the start of your trade then you shouldn’t be trading.
Your exit strategy may be as simple as ‘a stop-loss order when my loss hits 5% or a take-profit order when I’ll make 40% profit’.
Learn forex basics: Introduction to Forex Trading
Know your exit point before you enter a trade.
There are two reasons to exit – to maximize your profit, or minimize your loss. That means you have a set stop-loss order and a set take-profit order at which point to cash out your trade.
Demo Trade First: Learn the necessary skills with forex demo trading account before you open a real account.
Take a breather when your equity has taken a dive.
Analysis of trends in the market will show you that the market moves in dips and spurts within overall patterns that are predictable. No trend moves smoothly in an up or down line – there are inevitable periods of time when values suddenly spiral up or down based on some outside factor.
When a currency that you’re holding takes a sudden dip south, it’s tempting to succumb to panic trading, cut your losses and run even if your system tells you to hold on. On the other hand, it’s easy to catch the rising excitement as a trade starts increasing in value and scramble to buy more of the same. These are exactly the times to rely most heavily on your trading system. It will tell you exactly when to trade for maximum profit.
Don’t let your emotions call the shots: Stay cool, calm and collected. Patience and a clear head will win the game.
Letting your emotions rule your decisions can hurt your trading in several different ways. It’s the reason that most experienced traders tell novice traders that they need to develop a system – and stick to it no matter what. The system tells you when to buy, what to buy, when to trade and what to trade for. By sticking to your system even when you want to fly in the face of accumulated data, you’ll maximize your profits.
A system based on technical analysis of historical market trends is one of the most potent tools that you can utilize if you’re just getting started in forex trading – and many traders with years of experience continue to use their system to keep the profits rolling in. In fact, many will tell you that when their ‘gut instinct’ and their system collide, the system is almost always right.