In life, we all have to follow rules whether we like it or not. In the realm of Forex, there are several rules which if followed, can actually help you to become a more disciplined, profitable trader. Consider the following ten Forex related rules and core principles, as they can help you on your journey to becoming the best trader that you can possibly be.
1. You need a trading strategy: In order to be successful, you’ll need a plan that outlines how you’re going to reach your goals. As a forex trader, your strategy serves as a roadmap that will help you decide when and how you’re going to trade. There are a lot of different strategies online, so be sure to do your research to find one that works best for you.
2. Learn to control your emotions: There’s a lot of information online about trading psychology and if you haven’t done any research on the concept, you need to. Both positive emotions like excitement and negative feelings of grief, anger, disappointment, and so on can wreak havoc on your trading decisions if you let them. A good trader understands how these emotions can affect them and know how to control them, or at least recognize when to step away if they start feeling overwhelmed.
3. Try to learn from your mistakes: It’s easy to feel discouraged when you start losing money and you might even want to throw in the towel. The best traders use their mistakes as teaching moments and move on from them. Trust us, we’ve heard horror stories about billionaire traders losing a ton of money because of a mistake, but they didn’t give up, so neither should you.
4. Limit your risks: You don’t want to risk 20% on one trade, 15% on another, and so on, otherwise, you’ll drain your account. Slow and steady profits tend to be better and more promising than big risks when it comes to forex trading. Sure, you might win big on risk, but you could lose it all in the next moment and that sort of thing can break your career.
5. Watch out if you experience early success: Don’t allow yourself to get a big head or become overconfident in your abilities. After all, confidence is one of the worst emotions that forex traders can face because it causes one to throw caution to the wind. Always remain humble and make informed trading decisions that don’t rely on luck.
6. Know when to trade: Trading out of boredom is never a good idea. On the contrary, some trade because they become addicted to it and can’t stop. There might be days where there isn’t a good trade to carry out and that’s fine – don’t force it or do it because you have nothing better to do or else you’ll wind up losing money.
7. Don’t fall for “magic” systems or advice: Some forex robots, brokers, or indicators come with flashy promises and claim that they can absolutely make you rich. Remember that everyone would trade forex if it were that easy to get rich. Everyone’s experience is going to differ and you won’t get the results of a billionaire trader if you can only afford to invest $100 into your account.
8. Practice first: Demo accounts are available with most forex brokers and can be opened for free. If you don’t know what a demo or simulation account is, you should know that these work just like live accounts and will allow you to trade with virtual money so that you can see how you perform in a live market setting. Being that these accounts are free, there’s no reason not to practice on one to test your strategy or just to gain general practice.
9. Be sure to choose a trustworthy broker: Know that there are scammers out there. Big-name brokerages are generally safe, but there are some lesser-known options out there that want to scam beginning traders that just don’t know what to look for. Always read the terms & conditions before selecting a broker and try looking up online reviews. You can also check for regulation status to see if a broker answers to a higher authority.
10. Keep a trading journal: Traders that keep a trading journal write down everything about the trades they’ve made, not only technical data like entry and exit price but personal reasons why they made the trade and other factors. Over time, this can really give insight into your own personal habits and if there is anything you need to change about yourself or your strategy. For example, you might realize that your emotions are affecting your trades quite often where you wouldn’t have picked up on it without analyzing this data.