forex trading

Golden Rules for Forex Trading

3 minutes, 42 seconds Read

Trading may seem very complex and tricky to master especially for beginners! A lot of traders at times face some issues with their trading system and struggle to get it right.

Don’t worry if you are losing at the start. Always remember, failure is a necessary ingredient for success.

The rules that I am going to share won’t guarantee your success but keep in mind that they will help you to control your losses better.

  1. Choose your broker carefully – A lot of new traders choose brokers on the grounds that they like the interface or functionalities of their trading platforms without even knowing how they relate to their customers/users. Hence, you must always do your research before choosing a broker. Ensure your broker is registered with recognized regulatory authorities. Also, ensure they have a good reputation and that the spread they offer is competitive.
  2. Invest only what you can afford to lose – A golden rule of forex trading is to invest only what you can afford to lose. Following this rule will enable you to manage your risk and prevent any devastating psychological aftermath that may come with ruining your funds.
  3. Control your emotions – Don’t trade when you are distracted, shady or your psyche is just brimming with different thoughts. You should not deal with a chaotic mind. If you trade in these situations, it won’t do you any good, and the market will only gobble up your funds. Hence, get familiar with your psyche and try to keep track of your reactions to trading.
  4. Be comfortable taking a break – If you are consistently gazing at the graphs and monitoring market activities, you will be doing some health damage to yourself. You might even become distraught. Therefore, do not hesitate to take breaks. Simply ensure that when you do take a break, it is sensible and you do not have any open positions.
  5. Plan Trades cautiously – research and analysis are your companions. It is far better to research before making your trades than to just hop into the market anytime. Therefore, you should always research and thoroughly analyze the technical and fundamentals before placing a trade.
  6. Reasonable Risk/Reward proportion at least 1:1– Every time you enter the market you make your funds and yourself vulnerable to lose. So, you truly need to ensure you determine a risk/reward ratio that enables you to make each trade worth the risk, without being excessively covetous or unnecessarily fearful.
  7. Don’t Risk more than 5% of your trading capital – Don’t take too much risk as it will ultimately fail you someday sometime. Keep up consistency in your trades and as long as your strategy is winning more than it loses, over the long haul you will be a profitable trader.
  8. Try not to put Stop Loss too close to the entry point – This is very important particularly when your trade is going in the expected direction. Every position needs some up-and-down space to move around. The more unpredictable the market, the more up and down space you should give your positions to fluctuate. If you focus on the trade, you can generally move the stop loss up as the trade goes in the desired direction. However be mindful not to put it excessively high, or this will risk suddenly closing the trade, creating a situation where you could conceivably pass up the maximum profit potential of a trade
  9. Use Trailing Stop Loss when relevant – These are especially helpful when not effectively checking the trade. They can yield a satisfactory return if the market turns while leaving space for a portion of your funds to produce further gains in the event that it keeps on moving in the desired course.
  10. Have some tolerance, yet don’t mistake this for avarice – Patience is all you need. Excessive greed can send your whole fortune to null. It is indispensable to learn persistence, control the lack of caution, and trade by strategy and framework instead of emotion. Regarding taking your profit, be mindful not to mistake persistence for greed. Indeed, let your profit run but don’t give it a chance to spellbind you. You, therefore, need to stop it before it turns in the opposite direction in the event that it turns sharp and fast.

These Forex Signals daily will help you in understanding where you are making avoidable mistakes in your trading.

Also Read: How a Computer Stand Can Boost Productivity

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