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.