Apart from the trading strategy, the successful trader should follow some important rules. As important as the Ten Commandments, the ten rules of Forex which I identified during my experience will (hopefully) help you to keep your account in healthy condition. For those who are not familiar with trading on the financial markets, I recommend reading this article on what Forex is prior to diving in the deep waters.
After you read this article please share with me if you liked it and how it contributed to your trading experience?
“Trade for the success, not for the money”. You should be motivated entirely by achieving success in that particular trade and leave the thoughts of “what will I do with that money after I win”. Human’s mind get easily distracted when thinking about money. That is why the computer programs don’t get distracted when traded, because they don’t know the meaning of money.
The most important quality of a trader is the discipline. The key to successful trading is having control over your mind, body and emotions. You can make technical analysis of great use for your trading but without discipline it will be very difficult and almost impossible to make successful trades. Regardless of the fact if you lost or won today, if you are disciplined you can come back tomorrow and trade again.
Before you start trading Forex you should get to know yourself. How do you react under pressure? Are you willing to take the risk? Do you get mad when you think of losing money? If you cannot sleep in case of losing money, then leave the Forex market and rather purchase a shares portfolio with minimum risk. But if you can manage the risk with discipline go for the currency market. It is important to clarify whether you do it just for the game or for the investment. In the first case it is better to visit Las Vegas.
Get rid of your ego
The quickest way to wipe out your account is to allow your ego to dictate your trading decisions. That is why you should not share with your friends what you traded and how much you won or lost. Like this you might be in a position of holding your trade just because you don’t want to get embarrassed in front of your friend. Again, the computers won’t do it because they don’t know the meaning of friends. The only follow the rules of the trade.
I have literally seen traders praying in front of the monitor while the price is going towards their auto close levels. Remember, the market price is determined by the buyers and seller (on some other factors sometimes). Nobody will help you because it’s a jungle and everybody is against everybody. Follow your stop and limits, stay cool and don’t rely on things such as prays and emotions.
Leave your gains and cut your losses
When the stop order level is reached leave it. Even if the marklet recovers after it don’t get mad but be proud because you have discipline. In this sense, I respect the women traders because when they start losing they run away – this is the best in Forex. Conversely the men hold the losing position until their last breath. Remember to eliminate all emotions, ego and other human qualities. There are only numbers and nothing more than that.
Know when to enter and when to wait
I would say that 80% of the trading process passes in watching the screen and waiting for the best moment to enter or exit the trade. Think of it, the more you trade the greater the chance to make the wrong move. So trade only when you are 100% certain and have checked your technical and fundamental analysis.
Love your winning and losing trades
The losing trades are your best teacher. That is why you should note both winning and losing trades. Like this you will be able to learn from your mistakes and avoid them in the future.
Take a break
After three losing trades you must definitely take a break. Go out and do some sports or just walk in the park away from any screens. You need to calm down and erase all thoughts from your mind. In my opinion, you should also do that after winning trades. People often get too excited about their wins and easily risk all their accounts in a single trade because they feel too certain.
Follow the rules
This is the most important rule of all. Don’t break your rules and you will succeed. What is the sense in having rules and not following them?
You can start today by opening a risk free demo account and test your strategy!
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