Forex or foreign exchange has become the biggest financial market over the last decade in the world. Forex market is accessible wisely and plenty of resources are present over there.
Traders are always discouraged, as they are not seeing any profit on it.
FX trading requires the consistent discipline for yielding success, similar to other things in life. Successful traders are following the common discipline and these below given common trading rules.
Essential Forex trading rules.
These rules will help you in understanding the market and will improve the skills as FX trader. Therefore, we are suggesting learning them.
- Practice makes the things perfect, right.
- So when you have applied these golden rules of the Forex in the demo account trading and when you feel ready to trade in real then you can open the live account.
- Start Slow
- Never expect of making significant profits from day one.
Most of the novice traders are facing the same problem:
They are losing money and finishing up the game quickly than actually what they have anticipated. It is very common for the traders to double the capital within the first week of trading. After that due to over-confident in trading, you will lose it soon.
Always trade small and then build the profits slowly.
You will find very few traders who are getting success in the early stages of their career.
It requires patience and time to succeed.
1. Make a Trading Plan.
If you are having a trading plan, then it is one of the golden rules in forex trading.
With activity, this will hold true.
A person who is with the trading plan will more likely to succeed than someone without it.
You might be having the below things:
- You must have outlined the trading strategy
- All the entry and exit point should have been explained very well
- Take profits set and stop losses
If you are adhering to this plan is considered as the main element in trading. Also, make a note that the plan can be modified when the changes are driving the improvement. You should modify your plan only when no other option is available to you. Do not modify the plan in a way that the losing position is open for a long time.
Minimize losses by setting a stop-loss.
This is technical advice and it would be much more fundamental for your trading plan. But it is also important to set a stop-loss. As previously mentioned in this article that many novice traders are losing the capital and are not able to move forward. If you are setting the stop-loss, then it means that it will minimize your losses and the capital available to you can be used on another day. This is the general rule to which every trader are adhering. It is the top forex trading rules.
What is stop-loss?
It is a limit at which the losing position will be stopped.
By doing so, you will decide how many pips you might be afforded to lose
For example, when you are purchasing one lot of EUR/USD at the price of 1.15000, then you can set the stop-loss at 1.14980. This will your loss would be limited to 20 pips. It is important to note that there is no guarantee of the stop-loss, because of the market liquidity is not available sometimes at the price, which you have selected. So in this scenario, the stop-loss will be executed in the next best price, which is available.
A most common error for the novice traders is that they are forgetting all about the stop-loss placements because they are feeling that constant monitoring of price changes will not be sufficient. While you are spending most of your time in front of the chart, so sometimes when you are away from the keyboard for a few minutes then it will cost you hundreds of pips. That is why you should only open trades by attaching the stop-loss with them.
2. Keep all emotions aside.
Trading in Forex will be stressful and exciting both, It will depend on the losses and profits. As a result controlling of emotions is essential forex rules to live by. There is no room for the rash decisions and the mistakes in the forex market. Once you lost the money, then there is no undoing it.
- You think that you cannot focus solely on the trading session then you should not do the forex trading
- When you are not in a good mood, then take the break from trading and return when you are in a better mood. Trading in the excitement will also be detrimental.
- We all know that how it is easy to make decisions without have clearer thinking.
- Trading is the manual activity, which needs to be done with the highest level of structure and discipline.
3. Always learn and analyze.
The history of trading would be the main source of knowledge. You will be getting most of the benefit from this. You can explore the activities of the past and then analyze how the market has behaved at that time. Make the review on the daily, weekly basis, which also depends on the frequency of your trading. Then finally assess that how you can improve the trading strategy.
Learning from all others would be great, but you have to first try learning from your own mistakes and successes. Never focus only on losing trades sometimes you have to analyze the profitable trades that can be more beneficial.
Even if you are losing in trades then:
- You can learn from your mistakes
- You will gain the valuable experience and knowledge which you can adjust in your strategy
- The main point in analyzing is to learn from the past.
4. Adapt Quickly.
Market behavior tends to change.
Market behavior always keeps on changing. Therefore, it is very important to keep on modifying the trading strategy and then you have to adapt it quickly. You have to consistently keep on adding the new items.
For more info you can visit http://admiralmarkets.com/education/articles/forex-basics/forex-trading-golden-rules/