10 Forex Trading Rules

90% of the new forex traders don’t survive their first year of trading. Many forex traders fail and empty their trading accounts before they learn how to exploit the forex market to the fullest. Forex trading is like the survival of the fittest. It is one of the hardest jobs in the world to make money and forex trading is not one of the easiest ways despite the tall claims made by many.

Harness your inner potential if you want to succeed at forex trading. Forex trading is something that should come out from within you. Success lies within you. Many times, the traders are not aware of the fact that they have the power and might to shift the odds in their favor. Some traders do succeed at making a lot of money in the forex market but their numbers are not many.

In the 21st century, the buzzword is knowledge. This is the age of information and knowledge. The main reason why traders get defeated by the market can be attributed to their lack of knowledge. You can dramatically increase your chances of success if you want to by getting good training and education before you jump into the arena.

Without knowledge you cannot succeed. Every trader wants to get hold of the Holy Grail. A lot of traders seek the perfect formula that can predict the price action with 100% accuracy. Know this there is no perfect formula or trading strategy. But if you seek knowledge you may find something that works almost like 70-80% of the time. Nothing is perfect in this world. Knowledge is the key that can open many doors. Not only you need to know and understand how the forex market works, you also need to understand your own emotions and other people’s emotions. It is not just a matter of working hard but also a matter of working smart.

So you need knowledge about how the forex markets work, how the price action takes place, what moves the markets in the short term as well as the long term. You also need a set of good rules that can help you achieve success. In fact, you need to understand the high probability trade setups and how to manage your money wisely. The ten rules that I think are important for forex trading are listed below:

Forex Trading Rules On What You Should Do:
1) Practice is what will make you perfect. This is a childhood lesson that most forget but still works in the forex world or for that matter anywhere. Practice and practice on your demo account. When trying out a new trading strategy, first test it on your demo account.
2) Record keeping is what we constantly do in our offices and our businesses. Without a record we are blind. The same applies in the forex world; always keep a record of each trade that you make. Maintain a Trading Journal that should contain a record of each of your trades. Analyze each trade in the trading journal. Try to figure out what went wrong by putting your thoughts in writing. Write about the lessons learned and how you can make a better trade in the future.
3) You will find various methods and strategies on forex trading. Learn them but in the end it is all about customization. It is all about developing your own trading plan. Develop a personalized trading plan and update it frequently as you learn from the market. See what works for you. Something may work for others but it may not work for you. Only testing it will tell you what works for you. Once something works, tweak it to improve it further.
4) Never ever trade with a risk/reward ratio of less than 1:2! Only trade when you are sure about a risk/reward ratio of 1:2. When unsure of a trade, don’t make it. Stay out! It is always better to miss an opportunity than to have a loss.
5) Keep yourself abreast of the development in the forex markets. Daily monitor the market for 15-30 minutes. Update yourself frequently about the fundamentals and technicals affecting the market.

Forex Trading Rules On What You Don’t Need To Do:
1) Always be careful with money. Rule number one never ever trade with borrowed money! It will affect you emotionally and force you to make irrational trading decisions. Always trade with money that you can afford to lose! Money that you don’t need to pay for your utility bills and other necessities of life!
2) Try to understand the method and strategy with which you are comfortable. You should be able to understand why you are getting into a trade and how you are going to get out of it. Don’t follow someone’s advice blindly. Listen to what the other person is saying but try to understand the method behind.
3) Your number one duty is to be profitable. Always cut your losses and let your winner run. Just be concerned about being profitable. Don’t be concerned about being right.
4) Don’t take the brokers bait and leverage 100:1 or 50:1. 5:1 leverage ratio is enough. Don’t try to learn it the hard way how dangerous leverage can be. Don’t over leverage!
5) Control your emotions. Trading is all about controlling emotions. Learn to stay calm and composed. Don’t try to take revenge from the market after a terrible loss. Vent your frustration somewhere else.

In trading there are so many factors specific to each trader that can influence the overall trading performance like emotions, psychology, trading time frames, money management rules, lifestyle, trading capital and so on. Some strategies may work very well for some traders but may not have the same results for other over a period of time. One of the most important things that a trader needs to learn is the matching of trading method with the trader’s own trading style and personality.