By Alfonsas Mykolas
Investing in currency trading may seem like a three step venture: open an account, transfer some money and place some trades in a trading platform. That's it! Or...Is it really so easy? The truth is, if it was that easy, every forex trader would be making thousands of dollars on forex trading. The reality, sadly, displays a little bit different picture: a huge percent of losers and a tiny number of winners. Even the winning side rotates and shifts, as many experienced traders are burning their accounts and going bankrupt. You might ask: so, is there any chance of making a living in this crazy currency market? Yes there is. If you follow simple and effective rules and your trading plan, you will most probably earn some money and even make a living. The rules are simple and comprehensive by their nature; however it's the emotional side that is the biggest obstacle to keeping to the rules. There are some of the most important steps, crucial in forex trading business.
1. I believe, you have already heard it somewhere, but as they say: "repetition is a mother of study". Risk only 2% or even less of your invested capital per 1 trade. The reason for that is big currency fluctuations and volatility. Even the best traders suffer unexpected losses. By lowering your risk, you are making a long term profit perspective and preserving your capital, in case of any unexpected currency spikes.
2. Place your stops and do not move them, if the market is turning against you. It is very tempting to try to extend the losses of the obvious market trend against you. However, the move could stretch for an unlimited time and heights. It is better to lose a small amount of money, than keep your losses growing, hoping that a market might turn around.
3. Take some profits. Do not just wait for 300 pips without taking some portion of these pips. In order to do that you will need to open several positions of one particular trade and close them gradually.
4. Trade strictly according to your strategy, which you have tested in the long term market conditions. Do not trade just because you are "feeling right" and "have a hunch". A hunch would probably help, if you are trading, say, 7 years in a forex market and you have a strong intuition, big experience and a sharp sense where the market will go. Otherwise, just stick to your trading plan.
5. Stop trading if you had several losses in a row. Continuous losses, happening in a short period of time, bring a negative bias and a trader could deviate from his strategy due to a deceptive belief that his trading method does not work anymore. This, in turn, would bring chaotic trading and huge, quick losses.
These are just basic and classic trading rules, but they have tremendous impact on traders: young or old, experienced ones and newbies.
1. I believe, you have already heard it somewhere, but as they say: "repetition is a mother of study". Risk only 2% or even less of your invested capital per 1 trade. The reason for that is big currency fluctuations and volatility. Even the best traders suffer unexpected losses. By lowering your risk, you are making a long term profit perspective and preserving your capital, in case of any unexpected currency spikes.
2. Place your stops and do not move them, if the market is turning against you. It is very tempting to try to extend the losses of the obvious market trend against you. However, the move could stretch for an unlimited time and heights. It is better to lose a small amount of money, than keep your losses growing, hoping that a market might turn around.
3. Take some profits. Do not just wait for 300 pips without taking some portion of these pips. In order to do that you will need to open several positions of one particular trade and close them gradually.
4. Trade strictly according to your strategy, which you have tested in the long term market conditions. Do not trade just because you are "feeling right" and "have a hunch". A hunch would probably help, if you are trading, say, 7 years in a forex market and you have a strong intuition, big experience and a sharp sense where the market will go. Otherwise, just stick to your trading plan.
5. Stop trading if you had several losses in a row. Continuous losses, happening in a short period of time, bring a negative bias and a trader could deviate from his strategy due to a deceptive belief that his trading method does not work anymore. This, in turn, would bring chaotic trading and huge, quick losses.
These are just basic and classic trading rules, but they have tremendous impact on traders: young or old, experienced ones and newbies.
Forex trading involves high risk of your capital loss and it's a must for new traders to read as much as possible on forex trading. The forex platform and forex investment articles might bring more light, as you step in a currency trading business.
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