The 5 forex trading tips listed below are mentioned throughout this book. Experience shows that many beginning forex traders bleed money mainly because they fail to follow the next five principles:. Rule number 1 for every forex trader is to survive. Every trader has losing trades, but when you go broke you can put yourself in a position where you can no longer have winning trades.
Therefore, before everytying else you have to make sure you stay in the game. But even though a good trading strategy is definitely important, using solid money management and having a rational, disciplined trading attitude will get you further at the end of the day. The stop loss is perhaps the most powerful weapon in your arsenal as a forex trader, just as the most powerful weapon of the professional poker player is the fold if that means anything to you.
There are really only advantages to putting in a stop loss. It forces you to think about when the trade you're about to put on would be considered a failure. After you've opened the position you might talk yourself into staying in a trade going bad, using all kinds of irrational excuses. But if you've set a stop loss before opening the trade when you were still thinking rationally you'll always have that shining beacon, reminding you that you'd be a weak, emotional idiot if you stayed in the trade after the stop loss is triggered.
Another advantage of the stop loss is that you don't have to be afraid that one badly chosen trade will kill your whole account in case the trade goes bad and for some reason you're not in a position to close it manually.
So remember to always put in a stop loss and never move it further away after opening the trade. With those kind of expectations you're simply setting yourself up for disappointment, frustration and failure. Try to look at things realistically right from the start. Determine an attainable percentage of winning trades considering your strategy and experience.
Ask yourself how much time you can spend on trading and learning. When you have a clear view of your trading tools and conditions, you will find it much easier to work towards a profitable trading strategy. For example, suppose you're a day trader with a trading strategy where you risk, on average, 15 pips to win Gross revenue, because you still have to deduct the spread, i.
Let's say the spread is 2 pips per position, meaning your trades costed you pips. Your net revenue then, was 1. Of course data on trades isn't enough yet to be of statistical significance, but at least it would give you something to work with: For beginning traders an often overlooked source of information is other traders. Of course, reading books about forex is important. Books can provide you with a solid basis in a short time, providing a foundation to build on.
Practicing is another important factor to get the hang of things quickly, but you'd be surprised to find out how often fellow traders can give you valuable feedback about your trading strategy, or about alternative ways for putting on a particular trade. You should therefore become part of an online forex community and consider starting a trading blog, so people can comment on your strategy.
Don't be embarrassed because you're a beginner; remember that we all started out as beginners at some point, and many of the traders you'll meet on online trading forums are also just starting out. This last trading tip is perhaps the most important one. As previously said, trading on the forex is exciting, fun and dynamic, but it's crucial not to get carried away because of this. Successful traders approach trading like a business, not a hobby.
You use your trading capital to make business decisions; some will make you money, others will cost money, it's that simple. But as soon as you lose sight of your rationality I promise you that the losses will stack up pretty quickly. I'm talking about those moments that you do move your stop loss, because you just can't get yourself to take the hit. Or those moments that you decide to get in right now, even though your trading plan tells you to wait, because you're so scared to miss the trade, or perhaps you're just bored.
Those moments that you're so mad that you lost 10 trades in a row that you start trading with triple your normal risk, taking positions in currency pairs you normally never trade in. Available at Amazon and other stores. Get the Book Available at Amazon and other stores.More...