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In today’s world, everyone is talking about how to strike it rich trading. You rarely get much info on the process. The truth is, if you want success in any game, start by learning the rules. In forex trading, traders need to know how to play by the laws of success. If you lack discipline in applying the forex guidelines, forget about success. It’s that simple. The following are essential rules to be successful in trading.
1. Start by Creating a Trading Plan
This is the fist and one of the crucial rules in successful trading. Every seasoned trader has one. It prevents you from moving from one strategy to another. A trading plan is a set of rules that traders follow to determine entry, exit, and profit levels, among other elements.
2. Operate Forex Trading as a Business
Few take hobbies as seriously as they operate a business. That is why to be successful; you need to manage your forex trading as a business. This way, a person is more committed and serious about trading operations. Similarly, traders look to invest more in time, learning, and other resources to make their venture a success.
3. Make Forex Learning a Continuous Process
Even after perfecting my strategy and trading plan, I am still a student of the markets. The forex markets are very dynamic, and market conditions keep changing. Without continuous learning, you may not understand how to adjust your strategy to fit the changing conditions. To understand all concepts, become a lifelong student of the financial markets.
4. Trade what you can afford to lose
Most newbies learn this concept the hard way. Unfortunately, by the time the lesson kicks in, it’s already too late. If you place money meant for a mortgage in your trading account, there is a good chance you may lose it. Why? The fear of losing it will cloud your trading decisions hence mistakes causing overtrading. Why not start with an amount that is expendable to you?
5. Make Use of a Stop Loss
Nobody can guarantee the direction of the market. Therefore, use a stop loss. This refers to the level of risk you are willing to take in each trade. It can be a percentage, a number of pips, or a dollar amount. This helps in limiting a trader’s exposure per trade. With a stop loss, you can adequately determine each trade’s risk and reward.
6. Use Technology
Although some seasoned traders use “naked charts” to analyze the market, technology always makes the work stress-free. It can help in identifying chart patterns more naturally, among other benefits. Take full advantage of technology and incorporate it in your trading arsenal. With this, you have an edge.
7. Develop a Strategy Based on Facts and Statistics.
Take time to develop a sound trading strategy. A good tactic should be tested and give positive results over time. I always encourage traders to forward test a strategy at least six months in a demo account. If the results are good, then place it in a live account. This way, a few losses will not discourage you since the system makes a profit in the long run.
Bottom line
No successful trader makes trading decisions through a gut-based system. They follow several trading rules, and that’s why they are successful. To join this coveted club, ensure you play by the rules of success.
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