Home Library Rules of the Forex trading


The rules of forex trading

Rules of the Forex trading

Popularity of trading on Forex is growing every day. An opportunity to profit quickly in several thousands of dollars attracts people from all over the world. However, Forex trading is a very risky business. If you ignore the rules and recommendations of experienced players and rely only on your luck, it’s easy to lose every penny.

Forex has a lot of advantages like any other business. This is an opportunity to manage your time without bosses and with a huge freedom in the choice of the working strategy. In addition, the income  you can get when trading in Forex has virtually no limits. The only thing that deters many people from this type of earnings is a high level of risk.

Naturally, Forex trading is unpredictable, but you can still identify some general rules that will help the beginners to succeed in the market.

Select one currency pair

Each currency pair is unique. To predict the possible direction of price quotes, you need to study the history of its movements, to understand the total market, to determine the approach that you should use when finding this pair in the open position, etc. It’s easier for a beginner to understand the features of only one currency pair than several. It is better to take an appropriate extra pair after getting some experience in trading.

Stick to your own method

Jumping between the methods is a bad strategy for a trader. Every experienced trader has his own strategy based on his errors and experience. A beginner should choose a method which most impressed him and stick to it. Every transaction should be recorded in a notebook since it allows to analyze the reasons that led to success or failure in a particular situation and make appropriate conclusions.

Rely only on yourself

To succeed, you need to make all the trading decisions independently, without relying on the opinion of the majority of players, friends or the rumors that spread on the forums. Many beginners fail due to the fact that mindlessly follow the crowd. It’s much better to rely on your own knowledge and experience and stick to the market signals.

Avoid complicated graphs

The presence of a large number of indicators makes the charts confusing and incomprehensible. Besides, it increases the likelihood of contradictory signals, which complicates decision-making. Thus, beginners who have not yet had time to understand all of the nuances of the foreign exchange market should use graphs with at most two indicators.

Don’t play against the trend

This is a basic rule for the beginners. The market always has a definite trend or direction. Not to fail, you should always adhere to this direction. Only experienced players who have learned the turning points of the market risk to go against the trend, though even they often fail.

Do not work on the peaks, stick to your strategy

For all beginners, it is important to determine the dominant market trend and the time to join it. It is better than trying to calculate the peak value trend and to predict the future price movements. To determine the mood of the market, you need to have the skills of a psychologist, to understand the reasons for the rise and fall of prices and be able to predict the responses of the participants.

Do not trade too early

Before you start trading, you need to analyze the market carefully to understand its mood and come up with a strategy to catch a trend. If you neglect the analysis and start trading, you can lose every penny. In unclear situations it is better to close the position and wait for a more convenient time to trade, because the risk of loss increases during the times of chaos.

Many traders try to trade right after the news, trying to get more profit. But it is important to accurately determine the time and direction of a market reversal. And since beginers rarely have this feeling, such a strategy may end in failure.

Do not lose control

The loss of control is the main enemy of beginners who trade in Forex. Excessive euphoria after a good deal can push a player to the hasty action that will lead to losses. Forex market likes a cold head. Therefore, you need to consider every transaction carefully and to resist the momentary impulses.

Adjust risks

Accurately assessing the risks and the time to close the position is the basic skill of a successful trader. If a position is successful, you should try to «squeeze» all the possible profit out of it and not to close it immediately upon receipt of the first income. At the same time, you need to eliminate losses rather than wait for the market reversal for the better. Without these measures, it will only lead to more losses.

Adequately assess the potential profit

The basis of successful Forex trading is experience. Without special knowledge and skills, earning a big sum of money in the currency market is not possible. So you need to be prepared for the fact that the first profit will be small and not stable. Before Forex trading will generate a regular and substantial income, it will take several months or even years.

The main thing to trade in Forex as in any business is to be able to draw the right conclusions and not give up after the first failure.