Top 10 Forex Trading Rules to Know
Contrary to what every Forex ‘expert’ out there would have you believe, it’s not easy to learn how to trade Forex at all. Trading Forex is one of the most challenging skills you can ever set out to learn, which is especially daunting if you’re a beginner just starting out to learn how to trade Forex. If you’re finding it hard to learn how to trade Forex successfully right now, you’re probably wondering: “Can a beginner make money in Forex trading?” By the end of this article, you’ll know what you can do to make money in Forex trading right now.
Can A Beginner Make Money In Forex Trading?
If you have a look around the many Forex websites, forums, seminars and magazines, it seems like everyone’s making millions of dollars trading Forex! The thing is, Forex traders love to talk about their winning trades and make themselves out to be wildly profitable traders, but the reality is that only 5% of Forex traders are consistently making money. Yes, even a beginner can make money in Forex trading, but there’s a big difference between making money in Forex and making a full time income, achieving financial freedom, and building wealth through Forex.
What Stops Beginners From Making An Income
So what’s stopping beginners from making a consistent, long term income from trading Forex? Well, unlike the professional Forex traders working for the big banks and hedge funds, most beginner traders learning to trade Forex aren’t paid a full time salary to immerse themselves in the markets. If you’re just starting out in Forex, then you’ve probably got a full time job that you spend at least 8 hours a day on, and a family and social life outside of that. That means that you have a very real shortage of time to get yourself to the level where you can trade like a pro, and believe me, it takes a lot of time and consistent effort.
It takes years of study, practice and real experience in the markets to learn how to trade Forex successfully, and get to the level where you can consistently make money in Forex trading. Not to mention that you’ll be taking on, for all intents and purposes, an unpaid part time job that will chain you to your computer while you are trading. It’s something that will alienate you from your social circle, and put considerable strain on your family relationships as well. It’s no wonder that most traders wanting to learn how to trade Forex will give up within 3 months, and never make money in Forex trading.
What You Can Do To Make Money In Forex Trading Now
So what can you do to make money in Forex trading right now? The best shortcut I know is to buy a proven Forex trading system to do your trading for you. I’m not going to look you in the eye and tell you that you can just go out there and pick any system and make millions, because that’s simply not true. Profitable trading systems are rare, and you need to choose very carefully. That said, if you can find a trading system that works, you can overcome the biggest challenges any trader faces while they learn how to trade Forex. You’ll be able to gain valuable Forex market experience, preserve your personal relationships and most importantly make money in Forex trading while you learn how to trade Forex.
When you’ve built up the capital and income of your Forex systems operation, and have gathered up valuable trading experience, you may decide to try out trading Forex for yourself. Regardless of whether you trade with an automatic Forex system in the short, medium or long term, it’s a powerful solution that will enable you to make money in Forex trading even if you’re a beginner.
Top 10 Forex Trading Rules to Know
Most people who are interested in learning how to become profitable traders need only spend a few minutes online before reading such phrases as “plan your trade; trade your plan” and “keep your losses to a minimum.” For new traders, these tidbits of information can seem more like a distraction than any actionable advice. New traders often just want to know how to set up their charts so they can hurry up and make money.
To be successful in trading, however, one needs to understand the importance of and adhere to a set of rules that have guided all types of traders, with a variety of trading account sizes. Each rule alone is important, but when they work together the effects are strong. Trading with these rules can greatly increase the odds of succeeding in the markets.
Rule No.1: Always Use a Trading Plan
A trading plan is a written set of rules that specifies a trader’s entry, exit and money management criteria. Using a trading plan allows traders to do this, although it is a time consuming endeavor.
With today’s technology, it is easy to test a trading idea before risking real money. Backtesting, applying trading ideas to historical data, allows traders to determine if a trading plan is viable, and also shows the expectancy of the plan’s logic. Once a plan has been developed and backtesting shows good results, the plan can be used in real trading. The key here is to stick to the plan. Taking trades outside of the trading plan, even if they turn out to be winners, is considered poor trading and destroys any expectancy the plan may have had.
Rule No.2: Treat Trading Like a Business
In order to be successful, one must approach trading as a full- or part-time business – not as a hobby or a job. As a hobby, where no real commitment to learning is made, trading can be very expensive. As a job it can be frustrating since there is no regular paycheck. Trading is a business, and incurs expenses, losses, taxes, uncertainty, stress and risk. As a trader, you are essentially a small business owner, and must do your research and strategize to maximize your business’s potential.
Rule No.3: Use Technology to Your Advantage
Trading is a competitive business, and one can assume the person sitting on the other side of a trade is taking full advantage of technology. Charting platforms allow traders an infinite variety of methods for viewing and analyzing the markets. Backtesting an idea on historical data prior to risking any cash can save a trading account, not to mention stress and frustration. Getting market updates with smartphones allows us to monitor trades virtually anywhere. Even technology that today we take for granted, like high-speed internet connections, can greatly increase trading performance.
Using technology to your advantage, and keeping current with available technological advances, can be fun and rewarding in trading.
Rule No.4: Protect Your Trading Capital
Saving money to subsidize a trading account can take a long time and much exertion. It tends to be significantly more difficult (or outlandish) whenever around. It is important to take note of that protecting your trading capital isn’t synonymous with not having any losing exchanges. All dealers have losing exchanges; that is part of business. Protecting capital involves not taking any superfluous dangers and doing everything you can to save your trading business.
Rule No.5: Become a Student of the Markets
Think of it as continuing education – dealers need to remain concentrated on learning all the more every day. Since many concepts carry essential information, recollect that understanding the markets, and the majority of their intricacies, is an ongoing, lifelong process.
Hard research enables merchants to learn the certainties, similar to what the different economic reports mean. Center and observation enable brokers to gain instinct and learn the nuances; this is the thing that enables merchants to understand how those economic reports influence the market they are trading.
World legislative issues, occasions, economies – even the weather – all affect the markets. The market environment is dynamic. The more merchants understand the past and current markets, the better set they up will be to confront what’s to come.
Rule No.6: Risk Only What You Can Afford to Lose
In manage No.4, I mentioned that funding a trading account can be a long procedure. Before a merchant begins using real money, it is basic that the majority of the money in the account be genuinely superfluous. If it isn’t, the dealer should continue saving until the point when it is.
It ought to abandon saying that the money in a trading account ought not be assigned for the child’s school tuition or paying the home loan. Merchants should never enable themselves to think they are basically “borrowing” money from these other important obligations. One must be set up to lose all the money assigned to a trading account.
Losing money is sufficiently horrendous; it is considerably more so if it is capital that ought to have never been gambled to begin with.
Rule No.7: Develop a Trading Methodology Based on Facts
Taking the time to build up a sound trading procedure is justified regardless of the exertion. It might entice put stock in the “so easy it resembles printing money” trading tricks that are pervasive on the internet. Be that as it may, certainties, not emotions or expectation, ought to be the inspiration behind developing a trading plan.
Dealers who are not in a rush to learn commonly have a simpler time sifting through the majority of the information accessible on the internet. Consider this: if you were to start another career, more than likely you would need to learn at a school or college for somewhere around a year or two preceding you were qualified to try and apply for a position in the new field. Anticipate that that learning how will exchange demands at any rate a similar measure of time and verifiably determined research and study.
Rule No.8: Always Use a Stop Loss
A stop loss is a predetermined measure of hazard that a merchant is willing to acknowledge with each exchange. The stop loss can be either a dollar sum or percentage, however either way it restrains the merchant’s presentation during an exchange. Using a stop loss can remove a portion of the emotion from trading, since we realize that we will only lose X sum on any given exchange.
Ignoring a stop loss, regardless of whether it prompts a winning exchange, is awful practice. Exiting with a stop loss, and thereby having a losing exchange, is still great trading if it falls within the trading plan’s principles. While the inclination is to leave all exchanges with a profit, it isn’t realistic. Using a defensive stop loss guarantees that our losses and our hazard are constrained.
Run No.9: Know When to Stop Trading
There are two reasons to stop trading: an ineffective trading plan, and an ineffective dealer. An ineffective trading plan shows considerably more prominent losses than anticipated in historical testing. Markets may have changed, instability within a certain trading instrument may have decreased, or the trading plan basically isn’t performing and in addition anticipated. One will benefit by remaining unemotional and businesslike. It may be time to rethink the trading plan and roll out a couple of improvements, or to start over with another trading plan. An unsuccessful trading plan is a problem that should be explained. It isn’t really the finish of the trading business.
An ineffective merchant is one who can’t follow his or her trading plan. External stressors, poor propensities and absence of physical movement can all contribute to this problem. A broker who isn’t in pinnacle condition for trading ought to consider a break to manage any personal problems, be it wellbeing or stress or anything else that forbids the dealer from being successful. After any difficulties and difficulties have been managed, the merchant can continue.
Rule No.10: Keep Trading in Perspective
It is important to remain concentrated on the 10,000 foot view when trading. A losing exchange ought not amaze us – it is a part of trading. In like manner, a winning exchange is only one stage along the way to profitable trading. It is the combined profits that have any kind of effect. Once a broker acknowledges wins and losses as part of the business, emotions will have less of an impact on trading performance. This shouldn’t imply that that we cannot be amped up for a particularly productive exchange, yet we should remember that a losing exchange isn’t far-removed.
Setting realistic goals is a fundamental part of keeping trading in context. If a dealer has a little trading account, he or she ought not hope to pull in tremendous returns. A 10% profit for a $10,000 account is very different than a 10% profit for a $1,000,000 trading account. Work with what you have, and remain sensible.
Understanding the importance of each or these trading guidelines, and how they work together, can enable brokers to build up a reasonable trading business. Trading is diligent work, and dealers who have the discipline and persistence to follow these guidelines can increase their chances of achievement in an exceptionally aggressive field.