Tag: Forex Rules

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Forex Basics

Which Countries Ban Forex Trading?

Forex trading is certainly legal in the vast majority of countries around the world, and very few countries prohibit speculative currency trading. At present, Belgium is the most prominent case, with too many warnings to its citizens. Another very different question would be to analyze why in some countries there is more difficult than in […]

Forex trading is certainly legal in the vast majority of countries around the world, and very few countries prohibit speculative currency trading. At present, Belgium is the most prominent case, with too many warnings to its citizens. Another very different question would be to analyze why in some countries there is more difficult than in […]

Forex trading is certainly legal in the vast majority of countries around the world, and very few countries prohibit speculative currency trading. At present, Belgium is the most prominent case, with too many warnings to its citizens. Another very different question would be to analyze why in some countries there is more difficult than in others to carry out Forex trading, and then we would have to stop to analyze the particular situation of each one.

Researching in different brokers we have observed that there are restrictions to the opening of accounts to citizens of certain countries. The issue is not that in these countries the practice of Forex is illegal, but that the brokers themselves for different reasons do not want to open accounts with some nationalities.

In summary, the list of countries where it would be more difficult to open an account for Forex trading would be as follows:

“Afghanistan, Azerbaijan, Bosnia and Herzegovina, Brazil, Guyana, Iraq, Laos, Yemen, Vanuatu, Uganda, Quebec, Syria, Ethiopia, Sri Lanka, Trinidad and Tobago, Tunisia, Iran, North Korea, Burundi, Cuba, the Democratic Republic of the Congo, Libya, Republic of Mali, Nicaragua, Somalia, Sudan, Zimbabwe, and Venezuela”

Many times, although the governments of these countries do not explicitly prohibit forex trading, it makes it difficult for various reasons, one of them may be the prohibition of bank accounts denominated in currencies other than those of the country itself. That is, as is the case of Venezuela for example, which limited the currency USD for use among its citizens. This circumstance makes complicated the payment in several gateways like Skrill or Neteller and therefore the simple task of opening an account with a few dollars becomes very complicated.

In other cases like Cuba, the limitations that the population has for good access to the Internet also make it very difficult for its citizens to practice Forex trading. Let us not forget that in Cuba and in some other countries the US economic and financial blockade still exists.

Another case apart is the countries in war, in these countries, some of them in the Middle East, it becomes practically impossible to have an account to practice Forex, as the difficulties in general multiply.

“Since tradING is extremely risky, many countries have imposed strict regulations on Forex trade to prevent financial losses for their citizens.”

Brokers are well aware of all these circumstances, and that is why many of them do not want to have relations with citizens of countries they consider “conflicting”. But as the circumstances of each country change from day to day, this list of “banned” countries is constantly being updated.

China. China and India deserve special mention, in these countries Forex trading is restricted by their respective governments, which does not mean that it is prohibited. Yes, it is legal and although China allows currency trading, Chinese traders cannot open their accounts with foreign brokers due to strict capital controls. China-based traders can only open their accounts with Chinese brokers. To attract Chinese traders, international currency brokers can open a local branch in China.

India. Forex retail is permitted in India, although it should be routed only through registered exchanges. Indian traders are not legally allowed to finalise cash transactions for foreign exchange trading. Another restriction of Indian traders is that they can only trade in currency pairs with the Indian rupee (INR), for example, EUR-INR, GBP-INR, JPY-INR, and USD-INR. This implies that Indian traders cannot trade in currency pairs without the INR. This is a big disadvantage for Indian Forex traders.

Japan. There is a lot of competition for Forex trading in Japan for smaller traders, and the market is growing rapidly. The financial services agency allows retail Forex traders in Japan to trade only through licensed brokers in Japan, they cannot register with other foreign brokers. There are also restrictions imposed on margin trading, typically 1:25 for major currency pairs.

South Korea. Forex restrictions in South Korea combine the restrictions of Japan and China. Due to capital controls, traders in South Korea cannot open their Forex account with foreign brokers. Due to strict government regulations, local brokers impose many restrictions on currency trade in South Korea. The maximum permitted leverage for Forex trading is quite low at 1:10

Turkey. The law has recently changed (relatively new regulations have only been introduced in 2017) for Forex trading and traders cannot use the services of unregulated foreign brokers. The local broker must also obtain a license to trade on Forex from the Turkish board for capital markets. The trader is required to make a minimum deposit of at least 50,000 Turkish lira.

Forex-Friendly Countries

On the contrary side to what we have been dealing with, are the countries where everything is easy for the practice of forex, and we have thought it convenient to name them also in this article because not everything will be prohibitions and difficulties!!

One of the particular advantages of becoming successful enough on Forex to do full-time trading is that it is possible to do it from any place where there is good access to the internet. There are no bosses, you don’t have to leave the house to go to work, and you don’t need to be in a specific place. You can go anywhere, so why not choose the best place? Naturally what is best depends on each person, but there are some general considerations we can use to make some recommendations.

The Right Price

Many dream of becoming rich with trading, and living in luxury in a city like New York. But the most realistic probability is to have a modest and consistent income. Earning a couple of thousand dollars isn’t exactly a bad income, but there are places where that can be a very good income.

Forex traders know that currencies vary in their purchasing power, and you have to take advantage of that knowledge. In fact, switching to another country could improve the situation of a forex trader significantly.

Basics

Trading on forex requires a good internet connection, banking infrastructure, and a friendly tax environment. It is for the latter that many immediately think of countries that do not tax capital gains. But several of those countries, like Hong Kong, Singapore, or Switzerland, have a high cost of living.

On the other hand, some of the so-called low-cost countries w-cost countries have other problems, such as lack of infrastructure and security. The ideal is to find a balance. But you also have to consider trading hours; it is not very pleasant to get up at a foul hour to trade at the best times in the market.

Candidates

If measured by popularity, Thailand would be at the top of the list. Not only for Forex traders, but many of those who work online will live or spend a good time there. They have no tax on capital gains, life is cheap, friendly people, there is good internet, and many foreigners. Another close candidate would be neighboring Malaysia, for the same reasons. Other countries that are not so well known, but still would be interesting to consider.

Panama: For those looking for a business-friendly and safe environment, in addition to being relatively close to the US. It is also an advantage that they speak Spanish and English.

Malta: It has the same status as the countries of the European Union. The weather is mild and meditative, and it does not tax most of the gains from forex trading.

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Forex Basics

The Rules of Forex: Are They Meant To Be Broken?

Darwin, analyzing the content of his work “the origin of species”, explained that the strongest species are not the ones that survive, not even the ones that have the greatest intelligence, the ones that survive are the species that best adapt to the changes. This has always been an important part of my investment philosophy, […]

Darwin, analyzing the content of his work “the origin of species”, explained that the strongest species are not the ones that survive, not even the ones that have the greatest intelligence, the ones that survive are the species that best adapt to the changes. This has always been an important part of my investment philosophy, […]

Darwin, analyzing the content of his work “the origin of species”, explained that the strongest species are not the ones that survive, not even the ones that have the greatest intelligence, the ones that survive are the species that best adapt to the changes. This has always been an important part of my investment philosophy, a clear example is my aversion to pension schemes, a product whose extreme illiquidity prevents adaptation to change, and the coronavirus crisis has set a good example of how harmful this can be: Many people have gone blind until it is not known when, and many of them are left without income and perhaps with economic problems. 

Having savings allows you to adapt to change, it is good to have savings; but if the bulk of your savings is locked in a pension plan, they will not serve to adapt to change…

Okay, yes, governments have changed the rules to allow some to be saved. And you’ve done well, by the way. But is it wise to let your adaptability depend on the government changing the rules? What if you’re not on the assumption that ransom is allowed? Maybe you can’t get it out because the plan is in your partner’s name, or because you don’t have problems but your son, father or brother does…

But this post is not about pension plans, but about rigidity vs flexibility; rules vs exceptions. And I’ve titled it “Rules are enemies of the best,” because that’s the corollary that comes from two premises that I think are true:

Rules Are Good

I will finish the post defending the deviation of the rules in certain circumstances, so it is good that I start by making it clear that normally you must follow the rules.  When there is a rule for anything (from the circulation code to the ratio of fixed income to the equity that you should have according to age and risk profile), these rules have been put by people who know a lot about the subject, and who have seen that for most people, Following these rules often gives good results most of the time. If you find a rule in a field where you are not an expert, you will do well to follow it. And if you find it in a field where you are an expert, you should have it as a reference and follow it most of the time.

That being said, make it clear that there are a few rules that are an end in themselves, and these must be fulfilled ALWAYS. But most rules are not an end but a means to achieve a goal, and in such cases, you have to stay the course towards the goal, not the rule…

But Rules Aren’t the Best

¡Nor do they claim it! Many rules do not seek to achieve the best, but to avoid the worst. I saw this a lot in my time at Indra, working in public administrations. There are rules to prevent the posts of civil servants from being given to friends, which would be “the worst thing,” but what happened with those rules is that if someone had entered as an interim had done a good job, he could not be allowed to continue in his post. 

But his position was taken to the contest by anyone who knew how to memorize more articles of the constitution… although that had no correlation with his good performance in the post. What was going on? On more than one occasion, they cheated themselves to make a call tailored to the person who was acting, breaking the rules, to achieve “the best thing”: that the one who had been doing that work continue doing it, for the benefit of all. Probably illegal, but certainly not reprehensible… if you’re looking for the best, you’ll have to break the rules. And the same thing happens with promotions, competitions for hiring companies… or outside the administrations, also happens with professional associations or designations of origin of wines. They all have rules to ensure minimum quality, but these rules will make it difficult to achieve the best possible result.

What About the investment Rules?

Investment rules are made with two main objectives:

Limit the risk: Achieve adequate profitability for the level of risk assumed. Both objectives are desirable (although the definition of risk can be discussed a lot), and to achieve them, certain investment rules have been proposed:

The Permanent Portfolio proposes:

  • 25% Shares
  • 25% Long-term bonds
  • 25% Gold
  • 25% Cash

Reducing the risk with age, Bogle proposed that the percentage you have in the stock market should be to subtract your age from 100 (I who have 46 would have to have 54% in the stock market), and the rest to fixed income. If your profile is more conservative, you can change the 100 by 90 or 80, if you are riskier you can use a 120.

These rules have worked pretty well most of the time, so it would be foolish to ignore them. But this post is about adapting to change… and certain circumstances have changed most of the time. The risk-free bond used to give modest but reasonable returns (2%-4%). Now he’s giving negative returns… you pay to lend the money!

For me, fixed income is at a terrible time, and variable income is at an optimal time. Are we going to follow the rules? Do we remember that the purpose of the rules was to limit risk and increase profitability? Because in the long run, buying cheap (stock market) is a great way to limit risk and increase profitability… 

The problem, of course, is that this is difficult because it is very easy to go from “applying the rules with flexibility” to making hot decisions, guided more by emotions than by reason. This is why designing a system of rules where rules evolve with the environment is especially attractive. Frankly, I have not seen anything similar in other disciplines (except in computer science, but is that computer scientists are “special”), and it would be very interesting… can you imagine that when a particular public administration shows above-average performance, it would be allowed a freer system of recruitment, without the obligation to go through competitions and competitions?

And this that I have commented regarding the rules of distribution of assets in portfolios applies also for many other rules that are used in investment…Distribution of assets by sector? Yes, but first let’s see if there are any particularly bad sectors (banking, for example), or expensive (dotcom in 2000, brick in 2007), and that we leave out.

Distribution By Country? Same Thing

The rule of PER 14? Very useful for detecting craziness when you see normal companies trading at PER 40, but beyond these extreme cases, it has many exceptions and nuances that need to be known. The rule not to invest in companies with high debt? It is more difficult to find exceptions to this because we are just talking about the survival of those species that are able to adapt to change, and high debt limits the ability to adapt to change.

So you know, learn the rules, apply them in detail, understand them thoroughly… and start thinking about when it’s time to break them. Adapt to circumstances and be flexible. And do not stop questioning your own ideas, and listen carefully to those who question them; sometimes you have to unlearn some things to continue moving forward. And as a general rule, avoid the rigidity that comes with debts and illiquid investments… Although I do not despise an illiquid investment that comes with a substantial discount!

Categories
Forex Basics

What You Don’t Know About Forex Regulation Could Hurt You

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers. There are hundreds of new […]

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers. There are hundreds of new […]

The forex (FX) market is the largest and most liquid market in the world, with around $5.3 billion traded daily. Day trading is the most common among Forex traders, but many of the investors depend on the creation of trading accounts and the execution of their transactions through Forex brokers.

There are hundreds of new Forex brokers and brokers constantly opening their doors to the public. This makes it difficult to choose the best broker and leaves traders at the mercy of the broker when we talk about transparency and honesty. The Forex market is huge, but regulation in this market is scarce and there is not a single global body to monitor it 24/7.

There are no specific statistics, but the amount of foreign exchange brokers and binary options working under a regulatory authority is minimal (estimated at 5 percent) and that gives many companies the opportunity to take advantage of their customers and engage in abusive practices without consequences.

The Risk of Non-regulation

For retail forex traders, the biggest disadvantage of most brokers’ lack of regulation of the forex market is illegal activity or outright fraud, as well as losses in a market increasingly dominated by speculative activity and large institutions. After a series of scams related to the forex market during the period 2001-2008, the CFTC to create a specific task force to address the problem, and stringent forex regulations were introduced several years later to protect retail currency traders.

Under the Commodity Trading Act (CEA), the CFTC assumed jurisdiction over leveraged Forex transactions offered to retail clients in the United States. This Act only allows regulated entities to act as counterparties for forex transactions with US retail clients and requires all online US forex brokers to be registered and comply with the strict financial rules applied by the National Futures Association (NFA).

At the institutional level, banks, which are responsible for 95 percent of daily foreign exchange trade, are heavily regulated. The United States Federal Reserve and the United States Department of the Treasury are very attentive to the regulation of the Forex industry and carefully monitor brokers for evidence of manipulation.

Forex Regulation: Why not?

Why is Forex regulation so important? The aim of regulation is to ensure fair and ethical business behaviour. Under the current regulatory contracts, all forex brokers, investment banks, and signal providers are obliged to trade in fair compliance with the regulations and regulations established by the forex regulators or their activities may be considered illegal. These bodies must be registered and authorised in the country where they operate, ensuring that quality control standards are met. Brokerage houses are subject to audits, reviews, and periodic evaluations that force them to maintain industry standards.

In addition, regulated Forex brokers must hold a sufficient amount of funds to be able to execute and complete foreign exchange contracts performed by their clients and also to return clients’ funds in the event of bankruptcy.

If a regulator finds a broker infringing its guidelines, it can use a wide range of powers – criminal, regulatory, and civil  – for the protection of consumers and take action against businesses or individuals that do not meet acceptable standards. It may publish notices that are important to ensure the transparency of the decision taken by the authority and to inform the public, thereby maximizing the deterrent effect of enforcement action.

Some regulators issue alerts about financial services companies and individuals, both abroad and in their local areas. Of course, there can be no guarantee that any action taken by a regulatory agency, such as the FCA in the United Kingdom, translates into a payment or return of funds or securities, even when formal disciplinary action is taken and sanctions are imposed.

Many of the measures taken by regulatory agencies against brokers covered by their authorities may also apply to unregulated brokers in similar situations by police and other enforcement agencies, but its mandate is limited and less likely to be imposed, leaving investors with few resources in the event of fraudulent practices.

Forex regulators work within their own jurisdictions but often work together to search for suspicious activities. In fact, in the European Union, a single Member State licence covers the whole continent.

Over the years, regulators around the world have sought to organize some kind of universal body of regulation. The Mifid (Markets in Financial Instruments) Directive was introduced in the United Kingdom in 2007 and has been the cornerstone of Europe’s financial regulation regime ever since.

The Mifid Regulation is being revised to improve the functioning of financial markets following the financial crisis and to strengthen investor protection. The changes entered into force on 3 January 2017, although discussions are under between the European Commission,  the Council of the European Union, and the European Parliament. The new legislation is called Mifid II and includes a renewed Mifid and a new Financial Instrument Markets Regulation (Mifir).

There are, however, powerful voices working to pressure the wholesale forex market to have a broad regulatory base. The Association of European Financial Markets (AFME), a body in the sector, has spoken out against the strict rules of MIFID II and has recently published a document highlighting “unforeseen consequences” that could lead to excessive regulation of the Forex sector that would not allow brokers to serve their traders comfortably.

Local Approaches

At present, there is still no uniform approach to the global level when it comes to this market. The regulatory industry continues to operate locally with each broker requesting regulation at a chosen location and some organizations being more active than others. In Japan, one of the most active retail foreign exchange markets in the world, the Financial Services Authority (FSA) oversees all markets, including retail trade. The FSA is proactive in regulating retail foreign exchange trading and has reduced several times the maximum leverage that can be used by retail currency traders in recent years. In the UK, where the FCA (formerly the FSA) is the main regulatory body, and in much of continental Europe there are very few limits to the level of leverage offered.

Cysec, the financial regulator of Cyprus, is part of the European Mifid regulation, but it has attracted a number of foreign companies who wish to take advantage of what is seen as light regulation and an easy way to obtain a licence without having to comply with the strict requirements imposed by other European financial regulators.

In Latin America, there is no regulatory agency, and traders are protected by the regulatory authority that regulates the broker, depending on the country from which the broker originates, for this reason, it is very important that if you are going to carry out trading in Latin America, do so only with a broker who is regulated by a globally recognised authority.

Currently, the lack of regulation of the institutional foreign exchange market continues to pose continuing risks for the retail investor, including increased currency volatility and discrepancies in available public information.

Despite the difficulty and cost of brokers to be under an authorized regulatory body, there are many worthwhile brokers who choose to do so and these have to be considered ahead of all others. Traders have a large selection of regulated brokers in their jurisdictions or in other countries and will also find the same features -and more- with regulated brokers as with unregulated brokers.

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Beginners Forex Education Forex Basics

10 Rules and Principles for Forex Traders

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.

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.

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.

Categories
Beginners Forex Education Forex Basics

The Golden Rules of Forex Trading

If we look around the internet we will see a lot of different tips and hints being thrown around, some are pretty good, while others seem like they are simply plucked out from thin air. There are however a few things that are true across the board, no matter your experience level and no matter […]

If we look around the internet we will see a lot of different tips and hints being thrown around, some are pretty good, while others seem like they are simply plucked out from thin air. There are however a few things that are true across the board, no matter your experience level and no matter […]

If we look around the internet we will see a lot of different tips and hints being thrown around, some are pretty good, while others seem like they are simply plucked out from thin air. There are however a few things that are true across the board, no matter your experience level and no matter how long you’ve been trading. There are a few little rules that you should always take into consideration. We are going to be taking a look at a few of them and why they are so important if you want to become a successful trader.

Understand When to Limit Your Losses

One of the major areas of trading is risk management, this is simply the way that you protect your account. Without it, your account is liable to be blown with pretty much every single trade that you make, so it is vital that you have a risk management plan in place. As well as this plan is the need to understand why you should be cutting your losses. This is not something gotta anyone likes but it is a very important part of trading. When you have a trade going the wrong way, what do you do? Do you hold on to it in the hope that the markets reverse or do you deceit to cut the loss and then rebuild the account from the loss position? 

There isn’t an exact right or wrong answer here because everyone is different, we all have different abilities to handle risk and stress so ultimately it is going to come down to you. A lot of your profitability will come down to your ability to get out of, losing trades before they go too far. There are a few ways of doing this, either watching the trade manually, setting stop losses, or one of our favourites, setting up trailing stop losses. These are good because they act the same as a fixed stop loss, except for the fact that they move with the market, as your trades go up, the stop loss will follow them, when things reverse the wrong way it will hit the stop loss and you will close the trade. Just ensure that you have things in place along with your risk management plan in order to get out of trades before it is too late.

Understand and Accept Your Limits

When we first start out we just want to get started, we want to start placing some trades in order to get the ball rolling, but this is not exactly the smartest thing to do right from the very beginning. Simply thinking that a trade is a good one is not enough, instead, you will need to look at each trade with a clear mind with a set amount that you are going to be risking on this trade. Doing it this way will enable you to know exactly how much you have to use and so you can limit your position to be within your own boundaries.

It is important that you then stick to these limits, there is no point in making him just to break then the next minute. You will need to be strict with yourself and to have a lot of self-discipline in order to do this, but in the end, it will certainly pay off. If you have set yourself a weekly loss limit or a monthly loss limit, if you hit that amount, then no matter what else is going on, you will need to stop trading and then use the remaining time to analyse what it is that has gone wrong and to work out ways to avoid it happening again in the future.

Develop Your Trading Style and Stick With It

Unless someone is simply copying someone else trade for trade, no two traders are exactly the same, they may take very similar trades, but this does not mean that they are using the exact same strategy, we all create our own variations of them that suit our own personalities better. You need to build up your own knowledge base and to work out exactly what it is that you enjoy about reading and what you are good at. Once you have done this you need to select a strategy and a style of trading that suits you and that you have a good understanding of. Once you have done this, you will then need to continue to learn more, but the important thing is that you stick to that same strategy.

The importance of sticking with it is that you gain a much better understanding of the ins and outs, chopping and changing is never a good thing when it comes to trading as results can only be considered over a long period of time, and not simply after one or two trades. So be sure that once you have your strategy, you stick to it and work on it.

Patience

Patience is something that a lot of people unfortunately lack, yet it is such an important trait to possess when it comes to trading, without it, you will become stressed, frustrated, and will most likely start putting on trades that you probably shouldn’t. Patience allows you to wait for the right moment to put on your trades, if the markets are not yet in the correct state or they do not line up with your entry requirements, then you need to exercise patience and hold off making any trades, if you do then it will be considered a bad trade which could lead you to lose out and having some potential losses.

Make a Plan and Follow It

This is probably one of the more important rules to remember, once you have created a plan, it is paramount that you stick to it. This is relevant for a number of different reasons, the first being that you are not able to work out whether a strategy has been successful for a longer period of time. You cannot judge a strategy unless you have been using it properly for at least one month. The other main reason why you need to stick with it is that your strategy and trading plan will also have your risk management plans built into them, as soon as you start doing things differently it is putting this out of whack. This can then result in larger losses or smaller profits, making your overall strategy far less profitable in the long run. The moral of the story is to simply stick to your trading plan and strategy once they have been created.

So those are just some of the rules that you need to be considering when you start or continue to trade. There are of course many more and most likely some that you have made up for yourself, once you have your rules, keep to them and it will make your trading journey a lot simpler and hopefully a lot more profitable.

Categories
Forex Basics

Top 9 Rules For Successful Trading

Everyone wants to be a successful trader, that is the entire reason why they got into it, but for most, this is just a dream and it never actually becomes a reality. This may not be through a fault of their own, but more often than not it comes down to the way that they […]

Everyone wants to be a successful trader, that is the entire reason why they got into it, but for most, this is just a dream and it never actually becomes a reality. This may not be through a fault of their own, but more often than not it comes down to the way that they […]

Everyone wants to be a successful trader, that is the entire reason why they got into it, but for most, this is just a dream and it never actually becomes a reality. This may not be through a fault of their own, but more often than not it comes down to the way that they were trading or the way that they had their trading setup. Due to this, we have come up with a number of rules that you should be setting yourself when trading, they are there to keep things in line and on track and should make becoming profitable and successful far easier than if you are trading without them.

Rule #1 – Treat trading like a business.

One of the first things that people may tell you is that you need to treat trading and forex like a business, the money that you are using is no longer your own and so you need to look after it. This is a way to try to rid yourself of some of the emotions that can ultimately get in the way of trading, things like greed which has caused countless numbers of people to blow their accounts. It can be a little frustrating as, to begin with, it is not a paid job, but put in the time like you would a business, learn, work hard, and eventually, it will begin to pay you like a business.

Rule #2 – Use a trading plan.

When you first create your strategy, it is created in the form of a trading plan, these are a set of rules that you must adhere to in order for your strategy to be successful, it will contain your strategy as well as things like risk and money management. The plan has been created for a reason, it works, maybe not all the time but it can be profitable, if it is, then you should follow those rules at all times, otherwise, the risk will increase and there could be a risk of making losses, so once the plan has been made, always stick to it no matter what your mind or heart is telling you.

Rule #3 – Make use of technology.

Years and years ago, you had to be there on the trading floor shouting out your orders and requests, nowadays it is all down from the comfort of your own home, there are also other technological things available that can help you. Let’s look at indicators for example, there are hundreds of them available each with multiple different varieties, use them to your advantage. Do not spend hours working out the bollinger bands when an indicator can do it for you in the blink of an eye. If there is something out there that can help with your strategy (as long as it is still in line with your trading plan) then do not be afraid to implement it into your trading, it can only help speed up the process of trading.

Rule #4 – Keep learning.

Forex and trading are a never-ending classroom, there are always things changing and there are always new things to learn, as soon as you become complacent and no longer willing to learn, as soon as something changes, you will start to incur losses. Keep learning new strategies that suit different trading conditions, this way you will always be able to deal with whatever the markets are throwing at you. You could also start to try and learn the sorts of effects that different news events can have on the markets, useful when there are a number of large economic announcements coming up.

Rule #5 – Only trade what you can afford to lose.

A pretty straight forward one here, do not trade what you need. Before you make a deposit, think about the money that you are going to put in, if you were to lose that money now, how would you feel? Would you still be able to pay your rent and buy the things that you need to buy? If the answer is no, then do not deposit it and do not use that money. As soon as that money leaves your bank account it should be considered lost until it comes back in.

Rule #6 – Protect your account.

We are basically looking at risk management here, when you created your trading plan, you should have also created a risk management plan, this is how you will protect your account. It will contain things like how much you will risk on each trade, the sort of trade sizes that you will use, and the maximum number of open trades that you will have at any one time. Once you have this plan made, you need to stick to it, stick to it to the number, as soon as you start to break the rules for whatever reason, it will only lead to a downward spiral straight towards losses.

Rule #7 – Know when to take a break.

Trading can take up a lot of time, in fact, a little too much at times as it can be quite addicting. You need to be able to protect yourself from burnout though by taking regular breaks, and not just during the day, take days off at a time every now and then to completely free your mind of trading, this is when you are able to recharge your batteries and clear your mind. Your overall wellbeing will need it as sitting in front of a computer for extended periods of time and obsessing over the markets will only lead to both mental and physical health.

Rule #8 – Always use stop losses.

This goes along well with your risk management plan, using stop losses allows you to limit what you are able to use, many traders have blown accounts and lost everything because they did not use stop losses. Once you use a stop loss, do not change it, doing so will result in you gambling instead of using your predefined and analyse stop loss positions.

Rule #9 – Keep your goals in mind.

You started trading for a reason, so keep those in mind when you start to feel frustrated or like you want to give up, look back at why you started. The entire reason why you are here should always be present, it will help to give you the motivation and the drive to continue to learn and improve and will ultimately drive you to your success.

So those are a few things that you should keep in mind when trading and setting up your plans. Always trade with a plan, the importance of that cannot be stated enough, but build up a set of your own rules and stick with them, that is the best way to grow and to become a successful trader.

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Beginners Forex Education Forex Basics

The Old But Gold Rules Of Forex Trading

There are a lot of rules out there that people say that you need to stick by, some of them are simply an opinion, others have been around for years, we are going to be looking at some of the original rules set out by early traders which still ring true today, they are all […]

There are a lot of rules out there that people say that you need to stick by, some of them are simply an opinion, others have been around for years, we are going to be looking at some of the original rules set out by early traders which still ring true today, they are all […]

There are a lot of rules out there that people say that you need to stick by, some of them are simply an opinion, others have been around for years, we are going to be looking at some of the original rules set out by early traders which still ring true today, they are all things that are regularly told to people, yet people still manage to not take them seriously.

Create a Plan and Stick With It

You must have been told about this one when starting up, but you need a plan, a plan that you can stick to. So what does this actually mean? The plan that you create needs to contain a few different things, the strategy that you will be using, a risk management plan and a money management plan. If you have these three things then you have a recipe for success, however, it will only be a success if you stick to it, as soon as you deviate from the plan, you will begin to experience far more losses than when trading with it.

Use Stop Losses

Any trading strategy with its weight will have stop losses built into it, these enable you to limit the number of losses that you will be able to take on a single trade, they are also part of what works out the risk and reward ratio of a strategy. Stop losses are vital, they have saved thousands of accounts and will continue to save thousands more, as a trade goes against you, it will help to protect your account by closing before you get too far into the negatives. Never trade without them, when they get hit it can be a little disheartening but you should understand that they may have just saved your account.

Learn How to be Patient

The markets can be boring at times, really boring. When they are not doing what you need to do for your strategy to work, you can’t really do anything. The last thing that you want to do is to get bored and start to place trades that are outside of your strategy, instead you need to learn to wait. Having the knowledge that your strategy will work when you need to deploy it should be enough, otherwise, take a break and walk away from the markets. Being patient will enable you to get into the markets only at the optimal times instead of increasing risks and forcing trades.

Only use Techniques and Analysis that Suit Your Strategy

Part of learning and developing a strategy is that you know it inside out, you know everything that there is to know about it and the analysis that is required for it. So why would you use something else that doesn’t actually fit in with your strategy? The easy answer here is that you shouldn’t. You should only be working with things that actually fit in with your strategy, it is what you know and it is actually relevant to the trades that you will be making, using things that arent is just wasted energy and time.

So those are a few of the older rules with trading, there are of course plenty of other rules that are just as relevant to trading and for newer traders. It is important that you find a set of rules that work for you, but sticking to your plan, using stop losses, learning patience, and using techniques that are relevant to your trading plan should be top of that list.

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Beginners Forex Education Forex Basic Strategies

What is the Forex 10,000-Hour Rule?

The 10,000-hour rule is a theory that was developed by Malcolm Gladwell in a book called Outliers. In this book he stated that practicing daily, weekly and monthly over the course of 10 years will equate to around 10,000 hours of practice, this is the magic number needed to be able to perform a task […]

The 10,000-hour rule is a theory that was developed by Malcolm Gladwell in a book called Outliers. In this book he stated that practicing daily, weekly and monthly over the course of 10 years will equate to around 10,000 hours of practice, this is the magic number needed to be able to perform a task […]

The 10,000-hour rule is a theory that was developed by Malcolm Gladwell in a book called Outliers. In this book he stated that practicing daily, weekly and monthly over the course of 10 years will equate to around 10,000 hours of practice, this is the magic number needed to be able to perform a task to the standard of a professional, Malcolm was not being specific to a particular skill, instead, he suggested that anything can be taught in this manner, so how does this apply to Forex trading?

We all know that practice is important, you cant get good at anything without it, but when it comes to Forex, is this based on time? If we take the example literally and suggest that you have now been trading daily for the past 10 years, you would have experienced some of the major ups and downs that have occurred from 2010, these include things like the US financial crisis, the European debt crisis as well as the most recent drop of oil prices into the negatives. The experience of going through and experiencing those major moments in financial history can give you a much better understanding of major events and thus can enable you to plan your trades and strategies better.

Those are just the major events, trading in more standard trading conditions can also give you a better-developed understanding of how the markets actually behave and how they like to move in trends and patterns, the timeframes, trading session differences, and which currency pairs you prefer. It will also help you to understand a little about yourself, what your risk tolerance is, and how your personality dictates some of your trading decisions. We would also hope that the 10 years of trading experience would help you to develop some of the better trading habits and to have worked out some of the more damaging ones.

So does the 10,000-hour rule actually work? It is impossible to say and it will also vary for everyone, how much and how quickly you pick up and retain information and habits. A quick learner or more technical-minded person may get to the performance and have the knowledge of a professional in 1,000 hours or less, someone that takes longer to learn may take 20,000 hours to learn what is needed. The 10,000-hour rule should be taken as guidance rather than as a rule, once you hit that 10,000-hour mark it does not magically make you an expert.

Within the world of Forex, there are far more important things to learn than just putting in the hours, just trading for 10,000 hours will not teach you a thing if you just contact output in trades with no reasoning behind them or no learning from your mistakes. Using your time wisely to develop a working strategy, to help remove those bad habits and learn new good habits to replace them is just as important as the time you are putting in.

While we cannot deny that becoming a professional or even profitable trader, in the long run, does take time, a lot of time, we can’t really put a figure on how much, that will come down to you, your dedication and your willingness to learn.