The foreign exchange market, also known as the Forex market (Forex), has gained wide recognition among traders over the past decade. However, despite its availability, many traders fail in their quest to make real profits in Forex. There are many reasons for this, but the most common is the inability to streamline your trading decisions into a trading strategy.
When it comes to Forex trading, or trading in general, discipline is the decisive factor that determines your success. We have prepared a list that includes the basic Forex trading rules that will help you better understand the market and increase your chances of becoming a successful Forex trader. Let's break down these eight basic rules of online forex trading.
Golden Rules of Forex Trading
Forex Rule #1 - Don't Rush
Most novice traders aim to achieve significant profits from day one, but the problem is that it is precisely this desire that causes traders to lose a lot of money - this leads them to drop out of the game much earlier than they think.
A common occurrence among traders is to double their initial capital during the first week of trading, only to soon lose it all also quickly due to overly confident trading.
Make small trades and slowly build capital with profits. There are only a small number of traders who are able to achieve success at the very beginning of their career. In other cases, success is a matter of time and patience .
Rule #2 - Move from Practice to Real Trading
This principle of Forex trading is extremely important for traders. While demo trading is highly recommended for all beginner traders , there is one rule that deserves to be considered as a basic Forex rule – in order to gain skills and achieve success, you need to trade on a real account.
Even if you can easily trade profitably on a demo account, you will never be able to withdraw money from a virtual account. Trading on a virtual account will only benefit you if you do it right.
Firstly, the value of your demo account when opening must be equal to the size of your potential deposit.
Secondly, you need to set yourself a realistic goal. It can be anything, but it must be measurable. As soon as you reach your goal, you should move on to trading on a live account.
Be that as it may, do not start trading Forex online if you have not fully mastered the trading platform. Do not overtrade on a demo account, set yourself a goal and work towards it. Trading on a virtual account is just a stepping stone to trading on a real account.
Rule #3 - Plan Your Forex Trading
This rule applies to any kind of activity - those who have a plan are much more likely to succeed than those who do not. That is why having a trading plan is one of the golden rules of Forex trading. Your trading strategy should be described, entry and exit points explained, and Stop Loss and Take Profit levels set.
Sticking to the plan is the main element of your trading. Of course, the plan is subject to change, because, improving your strategy, you have to change it.
But remember that you can change the plan only if you have no open positions. Don't modify your plan just to keep a losing position open longer.
Rule #4 - Don't Waste Your Time
While Forex can be fun and educational, its primary function is to generate profits online . Therefore, you should only consider this activity if the time spent trading Forex is more valuable than the time spent in any other job.
Let's take an example
Imagine that you are working for $15 an hour
In addition, you have a trading account with a balance of $1,000. Let's say you are a successful trader who has a 5% return on investment, that is $50 in your case.
If you spend more than 3 hours on this, then trading is only a loss for you, because you could earn more in your regular job.
That is why the profit factor is one of the basic rules of Forex trading. Without a corresponding return, you will soon get tired and start making decisions with a higher risk factor to meet your income needs. Forex should become for you one of the profitable activities.
For this reason, you must take into account the cost of opportunity costs, or missed opportunities. Be that as it may, you should not risk more in order to earn more in Forex - you should only increase trading volumes by proportionally increasing the size of your capital.
Rule #5 - Never stop learning
Before you start real trading, as in any activity, you should learn How to start trading in the Forex market.
Market behavior tends to change. It is for this reason that you should modify your trading strategy and add new elements to it on an ongoing basis.
The scale of the Forex market is huge, and so is the content of its elements that you need to learn. Don't assume that if your trading strategy works great now, it will work for a long time to come.
Successful Forex trading requires the correct implementation of specially developed rules for foreign exchange trading. This means that your own rules also need to be improved.
Your trading history is an inexhaustible source of knowledge. Get the most out of it by researching and analyzing your decisions in the past through the lens of market events and behavior at the time. At the same time, you can be a fan of technical analysis or use the most effective systems for fundamental analysis in the foreign exchange market.
Forex Trading Secrets
There are secrets that are directly related to the foreign exchange market, and there are secrets that relate more to the psychological aspects of trading, but they also seriously affect foreign exchange trading. Read on to find out more.
Why some traders fail to make a profit
According to statistics, approximately 80% of traders lose their money in foreign exchange trading. And only 20% of traders successfully earn money on Forex. How do some traders differ from others? The former are usually afraid to trade during high volatility and are afraid of losing their precious investments.
But there is one important point. The money that 80% of traders lose goes to the other 20% of traders, it becomes their income. Good compensation, right?
If you decide to get into currency trading, you have to look at things realistically. Neither pessimists nor optimists can achieve significant success in Forex. Set realistic goals for yourself.
In the foreign exchange market, it is quite possible to receive income up to 5% per month. This is a good income, and if you learn how to earn it consistently, then you can easily make trading in currency pairs the main type of income. This is another important secret to successful currency trading - set yourself realistic goals.
This is another important Forex secret.
We do not deny that there are reliable providers in the Forex market that you can trust. But you don't see them often. If you still hope to find them, look closely at their history. If they have been doing well for many years in a row, they have many real satisfied customers, you may well work with them.
But, in any case, listening to someone's advice, whether it be a program or a currency market analyst, you must clearly understand the logic of this or that decision. If you blindly repeat tips without understanding their logic, you will hardly be able to trade Forex profitably.
As for real trading, there are also a few simple secrets here. Perhaps they will help you properly adjust your trading strategy and get even more income.
These secrets will also help you even if you are still deciding on your trading style, or if you want to try trading in some other direction.
Use indicators on Forex charts wisely
Very often, traders, having delved into the basics of technical analysis, want to use all the indicators at once. As a result, they clog up the chart and generally stop seeing important information on it. This is fundamentally wrong.
Use indicators on Forex charts wisely
Very often, traders, having delved into the basics of technical analysis, want to use all the indicators at once. As a result, they clog up the chart and generally stop seeing important information on it. This is fundamentally wrong.
The secret of currency trading is that the chart should always be as clear as possible. To implement this, you must understand which indicators you trust the most. As a rule, professional traders place several technical indicators and oscillators.
At the same time, one important nuance must be observed - indicators should not duplicate the same function.
Conclusion - Forex Trading Tips
Remember, Forex trading is not without mistakes, but it is important to learn how to learn from them so that the next time you find yourself in a similar situation, you are ready. You must gradually move towards your goal.
Currency trading is not an easy job and you should take it seriously. In order not to lose your mood and not be disappointed for no reason, set realistic goals for yourself and confidently go towards their achievement. In addition, the success of currency trading largely depends on your broker.
If you have a quality broker, he will become your reliable partner in the Forex market.
Having invested real money in Forex, you must set absolutely clear goals for yourself in order to understand where you need to move. Remember that your schedule should be as clear as possible.
It should contain only the most necessary indicators. With a minimal amount of information on the chart, you can see the data you need faster.
The above tips will introduce you to the basic principles of Forex trading, everything else will depend on you!
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