There are a few important forex trading rules in trading that should never be broken. If you apply these rules consistently, and with discipline, you will become a profitable trader. Many traders have learned a diplomatic code of conduct that have been learned the hard way by many traders, through trial and error, and by making the inevitable mistakes that everyone makes when they start a trading business. I've gone over a couple of these codes of conduct in this article. Learn from them now, so you won't have to relearn them later.
As a trader one of the first forex trading rules is this, you need to know what you are trying to achieve. Without specific forex trading rules in place like goals and objectives, it's difficult to succeed at any enterprise. It amazes me how often we can hit our targets, meet our objectives, and reach our goals, when we've taken the time to write down what we want to achieve.
One of the second forex trading rules is that you need to have measurable, achievable goals. In trading, the primary objective is obviously to make money, but it is important to have other objectives that are not strictly cash related. Remember, reward and risk go hand in hand when you are trading. You can't achieve high returns without planning and bracing for high risks.
Your objectives and goals have to fit you if they are going to work, but they should also have the following characteristics to be useful. First, your forex trading rules need to be measurable. If you can't measure your results against your goals, how will you ever know if you've achieved them? Secondly your forex trading rules need to be realistic and achievable. Make sure they are worth the time and effort you are going to put into them. Lastly, these should be positive goals. It's easier to be successful when you are trying to do something, rather than to not do it.
If you know what you are trying to gain in your trading, and when you are trying to achieve it, the whole of your efforts will be focused on meeting your objectives. It focuses your attention on the things you really want to achieve with the time and resources that you have available. Having goals will also give you a way to effectively measure the success and progress of your trading strategy. It's pretty clear why traders who have well defined objectives are more successful than those that do not.
Once you have set measurable, achievable goals in your forex trading rules, you need a way to meet them. Successful traders that have good forex trading rules in place do this by being consistent and disciplined in their approach to trading. How do they make their approach consistent? By developing and following a carefully planned trading system. This is a system tailored to their trading style, as their goals are tailored to their preferences. Once you have your system in place, you need to follow it. The system will tell you when to enter a trade, where to set your stops, and when to exit. A good trader follows their system and does what it tells them to.
One of the third set of skills you need in your forex trading rules is that you need to be confident in your system, to have access to the right kind of technology and information, and to have the discipline to stick to your plan. Without a plan you will be trading on impulse, guided by emotions. There is no more reliable way to loose trades than by trading that way.
With a trading system you are prepared for every situation you may face in your trading. This ensures you'll be consistent in your trading no matter what happens. To make sure you cover everything, your system should have:
1. You guidelines for entering, adding to, and getting out of your positions.
2. You need guidelines that have an action plan in case your trading computer, internet connection, broker, power, telephone etc. break down, or fails to be of any real use.
3. You need a code of conduct that will tell you what you will do if you are unable to trade.
4. You need a standard procedure that will tell you what you will do if you lose a certain percentage of your account
5. You need formalities that will tell you what you will do if all the markets are closed and you can't get out of your current positions.
Unless you have answers for all these scenarios that you need in your forex trading rules, you stand a good chance of loosing money. With the answers, and discipline you'll be able to tell if you trading system needs to be tweaked, or if it's just the markets. You will be well on your way to becoming a successful trader.
5 Simple Steps to Turn You Into an Elite Forex Trader
These 5 simple steps will help turn you into a confident, disciplined Forex trader. By using the steps outlined below you can be in the top 10% of all Forex traders. That would be the few that actually make money.
There are going to be two things you notice about these steps:.
They are obvious.
They are simple.
All aspects of Forex trading should fall into those two categories. In fact, one of the biggest mistakes I see Forex traders make is trying to learn and use too much.
However, that is for a different discussion. Back to the 5 simple steps.
Step 1 - Get Yourself Ready To Trade
In my experience with hundreds of traders I have been amazed with how few of them know how to get their game faces on.
They forget trading is a job. The greatest one in the world, but a job nonetheless. It's difficult for them to be self motivated. Like the majority of the world they need someone over their shoulder telling them what to do.
So, find anything in or around you that can be used to prepare to trade.
Take a shower
Drink coffee
Stretch
Read a book
Do Yoga
Anything to clear your mind
Once your mind is clear, move on to Step 2.
Step 2 - Look over your last few trades
Your trading success, just like the Forex itself, will have momentum and patterns. As you gain experience you will learn to see YOUR patterns. You might catch yourself making the same mistakes time and time again.
As you will learn later, you should be keeping a journal of all your trades. I don't mean the records that come with your trading software. Your journal should be as specific as it can be.
Why did I enter a trade? Why did I exit a trade? Was I near support? Was I near resistance?
Just to mention a few of the questions that your journal should answer for every trade. Take note of any repeated mistakes you have made over the last few trades.
Once you have recognized any trading trends, move on to Step 3.
Step 3 - Fundamental and Technical Analysis
Fundamental analysis refers to anything other then price action. In our case it means news.
Technical analysis refers to anything that is related to price action. Price itself, formulas, patterns, etc....
There is a reason why I mention both of those in one step. I wouldn't waste an entire step on fundamental analysis. It doesn't take me 3 minutes. I look to see what piece(s) of news are being released today in order to determine what kind of volatility to expect in the upcoming session.
This helps me when determining which support and resistance levels I expect to come into play.
As far as technical analysis goes. I don't care what tools, indicators, charts you look at. However, be consistent. Don't use MACD and CCI one night, and RSI and Stochastics another. Don't keep changing the length of your moving averages, or switch from simple to weighted to exponential.
The fact is, find what makes the most sense to you. I think it's great to understand what these indicators mean, but there is no need to over analyze.
I would like to add one thought here...use Fibonacci Lines.
Once you have finished your analysis, both fundamental and technical, move on to Step 4.
Step 4 - Money Management (Determine your trade size)
You should have a very well defined money management system. For example, never risk more then 4% / 5% / 10% of your account on one trade. Increase your trade size by one mini for every $400 / $800 / $1,200 in profit.
It has always astonished me how randomly some traders make these decisions. They change their approach day after day. This is a sure fire path to failure.
Determine what makes the most sense to you and stick with it.
Again, I'd like to add in a thought here. You shouldn't be trading a live account until you can consistently make money in a demo account. At least 2 straight weeks of profit, and not because you made $10,000 one day while losing money in 9 out of 10 days.
So, assuming you are trading a live account, adjust your position size to meet your predetermined formula.
Once you have determined your trade size, move on to Step 5
Step 5 - Make the Trade!!!
You have done all your homework. You have used all your skills and knowledge. The only thing left is to make the trade.
By now, you know exactly what you expect to happen with the currency pair you are watching. You just have to stay patient until your opportunity arises.
However, once it does, pounce on it like a lion on its prey. Do not hesitate when you see exactly what you expected to see.
Be sure, of course, to place a stop order either with your entry order or immediately after. Also, if you have one, be sure to place your profit target.
Once you enter or exit your trade, start writing. Record your trade in a journal, with all reasons for entry and exit. Be as specific as possible. You will be amazed how much valuable information you will gather over time.
Using these 5 steps you should be able to make drastic strides in your Forex trading. If, however, you are not comfortable with any part of your trading it is imperative that you consider a Forex trading course
.
Remember, you are only as good as your knowledge and your knowledge is only as good as your education.
There are going to be two things you notice about these steps:.
They are obvious.
They are simple.
All aspects of Forex trading should fall into those two categories. In fact, one of the biggest mistakes I see Forex traders make is trying to learn and use too much.
However, that is for a different discussion. Back to the 5 simple steps.
Step 1 - Get Yourself Ready To Trade
In my experience with hundreds of traders I have been amazed with how few of them know how to get their game faces on.
They forget trading is a job. The greatest one in the world, but a job nonetheless. It's difficult for them to be self motivated. Like the majority of the world they need someone over their shoulder telling them what to do.
So, find anything in or around you that can be used to prepare to trade.
Take a shower
Drink coffee
Stretch
Read a book
Do Yoga
Anything to clear your mind
Once your mind is clear, move on to Step 2.
Step 2 - Look over your last few trades
Your trading success, just like the Forex itself, will have momentum and patterns. As you gain experience you will learn to see YOUR patterns. You might catch yourself making the same mistakes time and time again.
As you will learn later, you should be keeping a journal of all your trades. I don't mean the records that come with your trading software. Your journal should be as specific as it can be.
Why did I enter a trade? Why did I exit a trade? Was I near support? Was I near resistance?
Just to mention a few of the questions that your journal should answer for every trade. Take note of any repeated mistakes you have made over the last few trades.
Once you have recognized any trading trends, move on to Step 3.
Step 3 - Fundamental and Technical Analysis
Fundamental analysis refers to anything other then price action. In our case it means news.
Technical analysis refers to anything that is related to price action. Price itself, formulas, patterns, etc....
There is a reason why I mention both of those in one step. I wouldn't waste an entire step on fundamental analysis. It doesn't take me 3 minutes. I look to see what piece(s) of news are being released today in order to determine what kind of volatility to expect in the upcoming session.
This helps me when determining which support and resistance levels I expect to come into play.
As far as technical analysis goes. I don't care what tools, indicators, charts you look at. However, be consistent. Don't use MACD and CCI one night, and RSI and Stochastics another. Don't keep changing the length of your moving averages, or switch from simple to weighted to exponential.
The fact is, find what makes the most sense to you. I think it's great to understand what these indicators mean, but there is no need to over analyze.
I would like to add one thought here...use Fibonacci Lines.
Once you have finished your analysis, both fundamental and technical, move on to Step 4.
Step 4 - Money Management (Determine your trade size)
You should have a very well defined money management system. For example, never risk more then 4% / 5% / 10% of your account on one trade. Increase your trade size by one mini for every $400 / $800 / $1,200 in profit.
It has always astonished me how randomly some traders make these decisions. They change their approach day after day. This is a sure fire path to failure.
Determine what makes the most sense to you and stick with it.
Again, I'd like to add in a thought here. You shouldn't be trading a live account until you can consistently make money in a demo account. At least 2 straight weeks of profit, and not because you made $10,000 one day while losing money in 9 out of 10 days.
So, assuming you are trading a live account, adjust your position size to meet your predetermined formula.
Once you have determined your trade size, move on to Step 5
Step 5 - Make the Trade!!!
You have done all your homework. You have used all your skills and knowledge. The only thing left is to make the trade.
By now, you know exactly what you expect to happen with the currency pair you are watching. You just have to stay patient until your opportunity arises.
However, once it does, pounce on it like a lion on its prey. Do not hesitate when you see exactly what you expected to see.
Be sure, of course, to place a stop order either with your entry order or immediately after. Also, if you have one, be sure to place your profit target.
Once you enter or exit your trade, start writing. Record your trade in a journal, with all reasons for entry and exit. Be as specific as possible. You will be amazed how much valuable information you will gather over time.
Using these 5 steps you should be able to make drastic strides in your Forex trading. If, however, you are not comfortable with any part of your trading it is imperative that you consider a Forex trading course
.
Remember, you are only as good as your knowledge and your knowledge is only as good as your education.
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