Never let a winner turn into a loser
If you notice that your trade profits are spinning, take your profits before they become a negative. Also, if you get into a trade that is a mistake, cut your losses before it eats your capital!
Logic Wins, Impulse Kills
Every time you make a trade, you need to understand the reason why you are making a trade. While the trend perhaps your friend, also know the dynamics of the market that are driving the trend! Do not trade because you have a financial goal – that’s the same thing as gambling. Trade because it makes sense. Be logical and practical. If you are above, never let greed get the better of you, because then you will lose everything – and sometimes more. Do not bet the bank!
Never risk more than 2% per trade
Currency trading is not like stock trading. You must have liquidity available. The golden rule for trading is $ 1000, never place more than 2 mini lots (20,000 K). This is the equivalent of 2% of your trading capital. This is a very conservative way of managing your money. By doing this, you can be sure that you will be able to stay in the game – even if you have some business work against you.
Trigger Fundamentally, Enter and Exit Technically
Fundamentals should be the reason why you enter into a trade (ie, strength and weakness of the market). However, after the support and resistance (technicals) is the best way to be a successful currency trader.
Always strong couple with weak
Coins have personalities like people. Never fold in coins like. For example, trend analysis shows that the EUR / USD acts almost identical to the GBP / USD. However, there is a strong positive / negative correlation between EUR / USD and USD / CHF. If there is a strong EUR / USD bullish trend, the USD / CHF will be almost (> 95%) strongly low. Therefore, understanding monetary correlations is a must!
To be right, but to be early means simply that you are wrong
If you put a trade before the fundamentals and technicals are proven often results in trades gone bad. So until the trend and analysis turn out to fruition, avoid trading a pair.
Know the difference between scaling and adding to a loser
Sometimes people go into a trade prematurely. They want to get out of a trade as fast as possible. They then fold the anti and pray that they recover from their error. Unlike stock trading, this is the kiss of death. You NEED to know when to climb in is appropriate against adding to a loser. Scale in is appropriate only when the trend has a slight kicker, but the feeling remains strong. For example, if a transaction has advanced 80 pips, but then scale back 20 pips, this could mean that the trade temporarily lost steam or the volatility is lower. This is the type of trade you scale on. However, if the trade keeps on going in the opposite direction never add to the position because you are simply adding good money to a bad situation. You like to throw away the money. DO NOT. So only scale in when the trend exists.
What is mathematically ideal is psychologically impossible
When a new trader enters the FOREX market, they are excited because of the statistics they hear – they can make millions of dollars or trading is easy. Quite the opposite. Yes, trends can point you in one direction and you can make a lot of money. The FOREX trading is VERY PROFITABLE but you can also do it GO BROKE if you do not correctly plan mathematically and have a psychologically sound state. You need to plan a reasonable risk reward. For most traders, they assume a 1: 1 or 1: 2 risk reward ratio. Optimally though, you want to go 2: 1 or even 3: 1. Most new marketers however NEVER place stops and place your stops so far out but your profit goals so close. This is just a sign of sadness and disgrace. You should never extend your risk more than your reward. For example, you have a 50 PIP RISK and a 50 PIP REWARD Your RISK / REWARD Ratio is 1: 1. Realistically though, you should make it 50: 52 or 50:53 because the spread is 3 PIPS. This It still makes 50/50. However, if you were to say a 50 PIP REWARS and a 500 PISK RISK, then your chances of profitability and maintaining your capital is greatly reduced. So, optimize your business realistically. Also, never stick to one Trade – because if you do this usually means that the trade will fail or you did not do enough research. Trust and research are essential to optimizing FOREX trading success.
Risk can be predetermined, but the reward is unpredictable
You must determine how much risk appetite you have. If you have the means and the ability to cope with more risk, then go for it, but do not overdo it. Do not spend the money you can not afford. Forex Brokers allow traders to use credit cards to fund accounts. NEVER ALLOW CREDIT – NEVER !!! USE THE MONEY YOU CAN LOSE. BEFORE YOU EAT WITH REAL MONEY – PRACTICE, PRACTICE, PRACTICE IN DEMONSTRATION ACCOUNTS. Determine based on the amount of capital you have, your threshold threshold before you trade. After putting the trade, NEVER change the STOP, unless, of course, you made a typo. If you make a mistake, move on to the next trade. However, if the trade is moving in your favor, let the trade continue until the momentum slows down.
No excuses, ever
If you did the research and make the rules, the most you can do is wait for a trade to run successfully. The end result may not turn out the way you want every moment, but if you do the work with due diligence, there is no reason to ever make an excuse – ever. Logic and planning is key to the success of currency trading.
Remember, trade is an art rather than a science. However, these 10 rules work well in a variety of market environments and will help keep you grounded – and out of harm’s way.