Trading forex is exciting, challenging and can be very profitable. Once you’ve hit the books and understand how it works, all you need is a laptop and internet to be on your way! But unfortunately, as in most things in life, turning a profit in forex isn’t quite as easy as it sounds. You need to be on top of complicated charts, follow complex trading strategies and keep track of trends. With all of that under control, you can put your best foot forward and trade with confidence.
Rules of the Game
There are many rules you can follow when trading forex, but they must be taken into context. The foreign currency market is dynamic and there’s no way that you can win only be following a cut and dry list of rules. Use rules as a basis for making decisions, but don’t rely on rules 100%. Remember to apply them in real timeto help make your entries and exits and keep in mind that they should follow along with your trading strategy and fall in line with forex principles.
Paying Heed to Principles
No matter what you learned, which guru you’re following or what rules you adhere to, you must stick to the basic principles of forex. This is where you’ll be able to tweak your trading style, assess the best time to enter a trade and know when to exit. Rules are great, but keep them dynamic. Use them as a guideline but only in the appropriate context.
Here are some of the basic forex principles that will lead you towards the right path:
- Develop your own trading strategy. There is not a template that you can buy and there is no one that you can copy from. This is the real deal here. You must use your own specific trading strategy, which you built on important factors specific to forex.
- Take time to analyze your own work. This is where your trading journal provides invaluable information. If you have been diligent about recording the details of every trade you entered, you will be able to glean vital facts by reviewing them. Use the hard data of your own trades to learn and make adjustments to your own trading strategy. Pay special attention to your positions that ended in losses so you can avoid repeating the same mistakes.
- Set limits on how much you can afford to risk in each trade. Don’t risk your home, your car or your livelihood by risking too much money. If you can’t afford to lose it, don’t trade it. It’s easy to become excited after a win or two and become over-confident. Remember that forex is always on the move, and not always move in the direction that you can anticipate. Understand your limits and know when is the best time to stop.
For beginners and seasoned traders alike, even when you follow all of the rules and principles, the distribution between winning and losing can be random.