Important rules of Forex trading
Traders on the currency market have unspoken rules, which should be followed by all novice speculators. Such observations, rules, conclusions did not emerge by chance, but were the result of tests and mistakes of many traders. As a rule, beginners repeat approximately the same way in mastering the market as the traders before them. Some rules of Forex trading are more like recommendations, that’s why it is best to treat them that way.
Tips for the trading process
- When you’re still learning, and you are not yet considered a pro, try to keep your trade volume low. It is advisable to choose the minimum volume of transactions that the terminal allows.
- It is useless to search for a ready-made trading system on the Internet, the application of which allows you to stably earn. It will be much more useful to study the system you like in order to create your own strategy on the basis of the found trading strategy.
- A congestion of indicators on the price chart does not mean that the trade will be successful. It has been repeatedly noticed that experienced traders completely or partially refuse to use indicators in their work.
- Any trading systems or Expert Advisors should first be tested on a demo account, and only then be used in the work on a real deposit.
- You should not change the rules or system settings in the process of trading. It would be better to stop for new tests or to make changes on the weekend. Otherwise, a person risks simply breaking the rules of his system due to emotions that might have appeared, for example, due to closing a losing position.
Tips on money management
- It is advisable to open a demo account or a bonus deposit. If you want to trade on the real account, it would be better to open a cent account.
- Even if the last few trades were very successful, you should not overestimate the lot for future forex operations, because you may soon have a string of losses.
- It is advisable to abstain from systems of increasing the lot after an unsuccessful transaction, such as Martingale.
- Clearly distinguish the purpose of the current trade. If you are new to the market and want to learn how to make money, then there is no need to choose any other transaction volume than the minimum volume available in the terminal.
- If you do not know how to calculate the optimal amount of capital for your trading, then try not to risk more than 2% of your capital for one transaction.
Tips on trading psychology
- Don’t try to win back after losing a certain amount of money in a trade. These actions, as a rule, lead to even bigger financial losses.
- If you lose your deposit, try to distract yourself from trading until you feel you have calmed down. Now you should look for the cause of the mistake that led to the loss of money. Until you find a way to eliminate it, there is no point in continuing to trade, otherwise a new account will follow the first one.
- Do not use borrowed funds in your work on the market. You’ll always be mindful of your commitments, which will surely have an impact on your trading. Excessive caution, worrying about money can cause you to make more mistakes.
- It’s better not to plan your profits for the day, week or month. Trade Forex, acting on your strategy’s signals. If you didn’t manage to earn as much as you planned this month, that’s okay. Financial planning pushes traders to take higher risks and commit rash actions.
- The goals that a trader sets must be achievable. This applies not only to the very possibility of achieving what you have planned, but also to the observance of the time intervals. For example, some beginners plan to start earning in the market after 3 months. When the chosen timeframe passes, people notice that the goal has not been achieved. Further disappointment or anger at themselves often becomes the reason for overestimating risks in trading or leaving the currency market.
Important tips on choosing a brokerage company
- You should not use the services of young, untested companies, even if they offer unique promotions, bonuses and incredibly small spreads.
- Before registration of the account you should carefully read the broker’s regulations, in order to be sure that the rules of the company suit you.
- Pay attention to the broker’s location in the rating, as well as pay attention to the traders’ reviews of the chosen company.
- Choosing a trading system for work, make sure that it will not violate the rules of the regulations. If the broker forbids the application of that trading method you are going to use, you should pay attention to other companies.
- When choosing a company to work in the Forex market, take into account the category of currency speculators, among which this organization has received recognition. For example, if the company is in demand among traders working with cent accounts, and you are interested in a large dollar deposit, then you should pay attention to that broker, which has a good reputation in this very segment, which interests you.
Forex is the biggest and most liquid market with a daily turnover of over 4 trillion dollars. It can easily withstand even a vain attempt to manipulate it. For this reason, currencies are considered the purest form of trading, but winning in this arena is not as easy as you would like it to be. Learning the principles of currency trading is a complicated task. If you decide to embark on this path and start forex trading, take note that learning all the details will not be easy. You must start with the very basics. You will not be able to achieve a decent result fast without knowledge.
You should study various videos and articles on the net to understand in detail what trading strategies are, who the advisors are, why indicators are needed. This is a treasure chest not only for beginners who want to start trading on Forex, but also for successful brokers. In addition to this, currency trading entails a high risk, which is warned by statistics about the high failure rate in this market. From the very first steps you should approach Forex trading in a disciplined manner. You must use a step-by-step strategy that must clearly define each of your moves in the market. From opening the first position, tracking it session by session, to closing the position for profit or loss.
How to get started in Forex trading
You must first study the theory of Forex trading. Find textbooks on Forex, thematic information sites. Set a goal for yourself, not to gain absolute competence, but to get acquainted with the conditions and actions, related to trading. Once you are familiar with the basics, you will need a competent forex broker. The competence of a broker will be defined by availability of a free demo version of the system. Using it you’ll get the first practical skills of work on Forex. As soon as you feel sufficient level of knowledge and comfort in work on the demo version of the system, you can continue.
Basic rules to start trading Forex
- Never push yourself to chase profits or risk money you can’t afford to lose. Rushing and taking unnecessary risks will only lead to quick failure.
- Always remember that losses are part of this game. Your goal is to reduce your losses, not eliminate them entirely.
- If the market moves against your strategy, get out faster. If everything is going according to plan, stay until your expected exit point and then take profits.
- The accepted risk rule is that you can lose no more than 2% -3% of your account balance per trade. If your balance is $1,000, your loss limit is $20 to $30. Set your stop loss at $20 and your exit point at $40 to $60, depending on how aggressive you want to be in trading. Your risk to profit ratio will then be «2X1» or «3X1», respectively. The point is that there will always be losses. You have to be able to pay them off until your strong trend emerges. Most of your wins will come from multiple trades, while most small losses and wins will cancel each other out. This means you should never have more than two active trades at a time. You can change these parameters over time, but safety first.
- Beginners tend to learn every available indicator or analysis tool. The result is chaos and paralysis. Working easier is better. Focus on one pair with a few tools that are sure to help you. If you have three losses in a row, leave the market for a while.
Many Forex trading rules may seem trivial or extremely simple, but they are important to remember. Even taking into consideration the few recommendations above, you can already avoid a lot of mistakes in your Forex trading. You need to start Forex trading with education. You will definitely not be able to make money, even to start working in the system, without proper training. Spend time to study and move as slowly as possible. That way you’ll keep the first risks to a minimum and not get disappointed. Nevertheless, if you are willing to pay attention to learning, you will soon have an opportunity to earn your first money in Forex. The modern foreign exchange market can be a great place for a beginning trader. Here you can start trading with a minimal deposit or even on a demo account. So you should study this option and make your own conclusions.