To be a successful Forex trader you need to understand the importance of rules that have guided all types of traders. Each Forex trading rule alone is important, but when they work together it will generate huge profits. Trading with these rules can decrease the chance of losing and can make you a successful forex trader.
1.Risk Only What You Can Afford to Lose
The money in a trading account should not be allocated for the kid’s college tuition or pay the mortgage. One must be prepared to lose all the money allocated to a trading account.
2. Always Use a Stop Loss
Using a stop loss can take some of the emotion out of trading since we know that we will only lose X amount on any given trade. The stop loss can be either a dollar amount or percentage.
3. Never risk more than 3.2% per trade
Never risk your whole account just for one trade, always follow proper risk management techniques. Many traders risk only 3.2% of their account per trade. Each may figure out their own % of risk per trade depending on their maximum tolerable drawdown.
Read more about MM rules here: https://altraforex.com/post/top-five-money-management-trading-tips/
4. Less emotions, more logic
Traders who cannot control their emotions will rarely make any successful trades and will quickly join the 95% of traders who lose money consistently.
Try to control the fear, the excitement and the adrenaline. Relax and think logically no matter if you are winning or losing.
Learn more about trading psychology here: https://altraforex.com/post/trading-psychology-how-to-manage-your-emotions-whiletrading-forex/
5. Technical and fundamental analysis go hand in hand
Don’t separate them, because both technical and fundamental analysis
can give you an idea of where the markets could be headed.
Fundamentals are good at dictating the broad themes in the market that can last for weeks, months or even years. Technical can change quickly and are useful for identifying specific entry and exit levels.
6. Demo Trade First: Become successful with paper trading when there’s nothing on the line before you open a real account.
7. Do not enter the trade if:
- it contradicts the global trend. For example, don’t enter the BUY trade if the global ternd is bearish. In order to check the global trend, use MA indicator on higher timeframes.
- there are big news releases. I highly recommend to check forex news calendar before entering each trade, because news announcements of big importance can effect market dramatically. I use this calendar: https://www.dailyfx.com/economic-calendar
These seven rules can be summarized as the famous golden rule of trading:
Cut your losses short and let your profits run. But even though this is a well-known adage in the trading world, traders usually forget it.