Forex Trading Rules

Top 10 Forex Trading Rules (1)


Various traders have differing trading styles, and as such, coming up with definite rules that apply to all, is somewhat difficult. Nevertheless, there are timeless principles that traders everywhere, no matter their style and system of trading, must imbibe. Rules like those regarding risk management, proper and quality education and keeping in emotions in check, pertain to all traders.

Most Important Rules of Trading (1)

Here are ten important rules you can’t do without in the market:

  • Invest in a time and resources in quality forex education

    We all are aware of the adage, “Knowledge is Power;” and there is no industry where that seems truer than the forex market. There is a plethora of free forex trading education platforms, especially online. Some brokers also provide free education. However, it must be noted that free platforms might not offer the best value, so it is important you consider subscribing to a paid forex education provider. Importantly, ensure – by conducting thorough research – that your chosen provider is credible and has a commendable track record.
  • Practise with a demo trading account

    Practice makes perfect, so goes the mantra. And to some extent in the forex market, the level of your expertise (and profitability) is a direct function of amount of time you commit to practise. A demo trading account can help you improve your trading skills by practising with “virtual” money. Once you’ve mastered your craft and have become profitable with demo trading, you can then confidently switch to a live account.

    Also, when you start using a live account, you may still wish to make use of your demo account to try out new trading strategies.
  • Develop a Trading Plan

    A trading plan is a set of personally developed rules that specify a trader’s entry, exit and risk management criteria for each trade.

    Recent technology have made it possible to test a trading idea before risking real money. This is called backtesting. Backtesting allows you to test your trading idea using historical data and decide if it works. Once a plan has been developed, the plan can be applied to live trading.
  • Ensure your plan is line with your goals and personality

    When developing your trading plan, you must note two things; it must be tailored to your trading goals, and similarly, you must take into account your personality. Each trading style has a different risk profile, which requires a particular personality and approach to trading for it to be successful.

    For example, if you cannot bear keeping a position open overnight, then you must take into account. Just be sure your personality is in tandem with the trading style you adopt. A personality mismatch will definitely to losses.
  • A Consistent Methodology

    Closely linked to the above; once you’ve perfected and developed your trading plan, you must stick to it. The market does not obey your wish sometimes, but that does not mean your strategy is not good enough.

    This is the bane of many newbie traders. New traders who first approach the markets will often develop exotic strategies, that promise to generate extraordinary profits, and with that they will fund their accounts, prepared to milk the markets. But often they fail. The reason most develop newer and fresher, more complicated strategies, is that they want to be right all the times. But the truth about the markets is that you can win only 6 out of 10 trades and still he very profitable.
  • Apply Technology to Trading

    Never has it been easier to be a trader. With so much resources and tools, some free and others really cheap, it has become relatively more possible to become a profitable trader than in times past. Charting software give traders an endless amount of ways to analyze the markets, with accessible indicators, oscillators and others to assist you to properly predict the market. The ability to backtest these indicators can help you test their effectiveness.

    Mobile apps can let us keep abreast of market events immediately they occur; you can monitor you trades from anywhere; you can objectively set your Support and Resistance points on the charts, using a Pivot Point calculator app; and many more products are being developed regularly.
  • Never Treat Trading as a Hobby

    To be successful as a trader, you must treat your trading as a full- or part-time business, and never as a hobby or present project.

    If you consider it to be a hobby, you will most likely have no real commitment to learning.

    You have to treat trading like a business that incurs expenses, losses, and involves uncertainty, stress, and risk. As a trader, you are basically a one-man business sole proprietor, and you must be focused on growing that business.

    Similarly, we recommend that you don’t treat as a job, because if you have the mindset that is a job, you will expect it to pay your bills at the end of the month. Of course, it can – and it will – but in the early days don’t expect that to happen.
  • Let logic be in control

    Trading is more of a psychological game, than any other thing. And there are 2 primary ways to react to psychological phenomenon: use our emotions or use logic; but emotions are powerful and do seem to be in control.

    Traders who cannot take control of their emotions tend to be unsuccessful. Train your mind to control the fear, the anxiety and the excitement. Calm your nerves and try to think logically.

    Of course it is extremely difficult to keep emotions in check when money is on the line, but a lot of money has been lost due to impulsive trading than to any other factor. To avoid this, properly analyse your trades before taking them, set appropriate and reasonable stops and avoid ‘babysitting’ your trade. Leave the trade to run its course, even if in loss.
  • Trade With Confidence

    Building confidence will require that you hone your trading skills, properly develop your trading plan and stick to it. However, whenever you don’t seem sure of trade, never execute it, as the saying goes, “When in doubt, stay out.”

    It is much better to miss an opportunity than lose chunks of your capital.
  • Keep a journal

    By keeping a trading journal, you are able to track your trading trajectory and growth, strategies employed, and (if you are objective enough) check if you are keeping to your trading plan.

    A trading journal can help you note mistakes made so as to avoid making the same in future; you can also track your breakthroughs and successes.

Want to see these rules at work?

You want to see the above rules being applied in real trades, by veteran traders who have made use of them to become successful, and want to partake and become successful, even in the present? Then subscribing to winning forex signals presents the best way.

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