Top 10 Rules for Success in Forex Trading

Forex trading is a vocation that is bound by rules. If you violate any of the rules of the game, you will end up on the losing side.

Newsletters, trading books, and articles have cropped up all over the web, highlighting trading rules for success in trading. This implies that you must adhere to these set of rules and use them as a guide.

These rules work, no matter the type or size of trading account you are currently running. Following these rules will ensure your success in the market. Here are the top ten rules for success in Forex trading in no particular order:

#1. Treat it as a business

You must approach trading with a full (or part-time) business mentality. Never treat it as a hobby or else, you will not make any real commitment to learning the ropes.

You are a small business owner, and when you work as a trader, you must put in the necessary work, research, and strategies to make the most of your business’s capacity for development. There is no steady paycheck, and it could at times be frustrating.

Trading also incurs losses, expenses, taxes, stress, risks, and uncertainties. So treating it as a business will go a long way in helping you achieve some level of success.

#2. Use a trading plan at all times

To succeed in Forex trading, you must have and follow a trading plan. This plan should include:

  • Your entry
  • Profit-taking level
  • Stop loss point
  • Your exit
The plan should also include a strategy that focuses on money management. It is a time-consuming undertaking, but it is worth the effort at the end of the day. You can put a trading idea to the test before you risk real money, thanks to the availability of technological tools for trading.

You can also carry out what is known as ‘back-testing,’ which is a strategy where traders apply trading ideas to check the viability of a trading plan on historical data. Each plan has a logic which leads to an expected outcome.

By carrying out back-testing and analyzing the result, traders can determine whether the developed trading plan is feasible or not. The most important fact here to take note of here is always to follow the trading plan.

If you go outside the plan -- even if such a move ends up as winners -- it is thought to be a poor trading strategy. This could have adverse consequences on the plan you have developed earlier.

#3. Follow the trend

Never go against the trend, no matter what. If the stock or market is bearish, go short. If the reverse is the case, when the stock is bullish, go long.

#4. Let technology be your friend

You need to take full advantage of technology when it comes to Forex trading. It is a competitive business, and you should not be slacking. Traders use chart platforms which allow them to view and analyze markets. This is why back-testing a trading idea is crucial as it prevents the loss of a trading account as well as frustration and stress.

As a trader, you need to make use of your smartphone for monitoring trades everywhere you go. When you do this, you will be in the best position to increase your trading performance.

#5. Safeguard your capital

Experts advise that under no circumstances must you trade over and above 10% of your portfolio in one trade. Protecting your capital has to do with preserving your business on the trading platform. If you neglect to do this, it’s only a matter of time before you are out of the market.

Capital preservation is not the same thing as not losing any trades. Losing trades is an essential part of any business. It is all about not taking unwarranted risks.

#6. Be impassive

Fear and greed: the two primary emotions that traders exhibit when trading. Don’t let fear and greed have any effect on your business. You need to be impassive when it comes to trading. Be emotionally stable, for that is the hallmark of a successful trader.

#7. Recognize when to stop trading

Why must you stop trading? Two reasons: a trading plan that is ineffective and a merchant that is unproductive.

When a trading plan is ineffective, it reveals a lot of great losses, much more than is anticipated. A lot of factors could be responsible for a trading plan to be ineffective. It could be due to a change in the markets or the lessening of volatility in a trading instrument, etc.

As a trader, you need to remain emotionless and businesslike. This could be an indication that you need to work on improving the trading plan by making one or two changes. When a trading strategy is ineffective, it does not imply that the end of the trading business has finally come.

An unproductive trader is one that does not follow his trading plan. Several factors can contribute to this problem, chief of which could be poor habits, a dearth of physical activities, etc. As a trading merchant, you need to be in peak condition before embarking on trading. If not, take a break and focus on dealing with any personal problems you may be battling with.

Stress and health issues are the primary culprits that render traders to be ineffective. Once you have successfully dealt with these matters, you can then resume trading.

#8. Be an informed trader

Many losses have been recorded by traders that took action based on tips they received from brokers or friends. Do not be among this statistic. Be a trader that is always informed by getting apprised of the latest situation in the markets. Developing trading procedures based on relevant facts is important.

#9. You should only risk what you can afford to lose

You should continue to save as much as possible. If you cannot afford to lose money, then don’t take unnecessary risks.

#10. Is the trade good? Take your profits!

You must make up your mind on how much profit you want to take before you enter a trade. If the trade ends up being good, take your profits. You can do this in two stages. You either take the profit stage by stage, or take everything at a go. When you have reclaimed the cost of trading, then you don’t have anything to lose.

Trading is not an easy task. It is hard work.You need to understand the importance of each of these trading rules and use them to your advantage. If you are looking for an innovative Forex trading platform, you can visit IC Markets for more information.

Author:. Adeyemi Adetilewa is a digital marketing strategist who writes for publications. He's the Founder and Editor of Ideasplusbusiness.com, an online community for entrepreneurs to share business ideas. His one word is #possibilities.
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