Tips for Trading Forex: 10 Rules for Living

1. Never trade money that you cannot afford to lose. If money is tight and you are having trouble paying your bills, you shouldn’t trade Forex. However, you could take the time to demo the trade so that you can trade comfortably when you have some venture capital. Don’t borrow money to fund your trading account.

2. Always do a trade show first. Trading with a demo account allows you to familiarize yourself with the broker, as well as place orders with the trading software. It also allows you to experience currency trading without risking your own money. Always demo the trade for 2-3 months or until you consistently earn pips. If you can’t trade profitably with a demo account, things won’t magically change when you start trading with your own money.

3. Always trade a stop loss order and only move it to secure profits as the market moves in your favor. It is not enough to have a mental stop loss because the markets can rise quickly and cause significant losses to your account balance before you have a chance to close the trade. Worse still, you could lose your internet connection and have no way to close your post. You should never move your stop loss order if the trade goes against you; leave your stop in place or close the trade and cut your losses.

4. Keep your emotions in check. Fear and uncertainty can cause you to exit an operation prematurely. Greed can cause you to pay back some or all of your earnings. Never try to get revenge on the market after a losing trade. It is difficult to operate without emotions, however, if you do not control your emotions, you will lose money.

5. Use leverage responsibly. Just because your broker offers 200: 1 or 400: 1 leverage ratios doesn’t mean you should. Leverage is a double-edged sword: it can increase winning trades or it can wipe out a trading account after just a few losses. If you must use high leverage, try using 50: 1 or 100: 1 leverage until you have more capital in your trading account.

6. Practice responsible risk management. Use a lot size and stop loss placement that never risk more than 2-3% of your trading account per trade. This ensures that your account can survive a series of consecutive losses before you start to see some winning trades.

7. Reduce your losses. You should always have a stop loss order to limit your risk and get you out of a losing trade; however, you do not have to wait for the market to reach your stop to close your position. If the price action indicates that the trade will not work in your favor, then don’t stay married to that trade. Cut your losses and move on to the next trade.

8. Let your profits run. Use trailing stops to lock in profits as the market moves in your favor. Do not close the trade prematurely, however, do not try to squeeze every last pip out of each trade or you will end up losing some of your profit. Let the market and / or your trading plan dictate when it is time to exit a trade. Remember: pigs are fed and pigs are slaughtered.

9. Always trade with the trend – The trend is your friend. Think of the trend as a river. Trying to swim against the current can not only be extremely difficult, it can also be deadly. Determine the overall trend in a time frame longer than the time frame you plan to trade in and then wait for a trade to develop that allows you to trade the prevailing trend.

10. When in doubt, walk away. Sometimes the best trade is the one that doesn’t get done. Don’t try to make a trade with nothing. Only take trades that are clearly defined by chart formations, confirming indicators, trend lines, and / or price action around support and resistance areas.

Currency trading doesn’t have to be complicated and overwhelming. Observing these 10 Forex trading tips will ensure you an edge over other new traders. Following these tips will help you avoid many common mistakes and put you on the fast track to Forex trading success.

Website design By BotEap.com

Add a Comment

Your email address will not be published. Required fields are marked *