Forex Trading - Successful Trading Principles
Having a set of rules to follow can help you become successful in forex trading. These rules should be simple enough to follow and very easy to remember. It should be formulated to guide you to become a discipline trader.
Cut your losses quick
Having a cut loss plan is good but not enough, the true success of a cut loss plan is on its execution. Sticking to the plan is vital in becoming successful in trading primarily executing your stop loss. Once you delay or do not follow your set stop loss you risk of losing more than your original plan. This is also the same when you take your profit too early because of fear or greed, you can easily give away 50 pips or more in taking your profit early in the ball game. Misused of this rule all together will leading to the inevitable cut loss or profit taking just before the market actually proves you wrong, then you pull again the trigger trying to catch up with the move then the trend moves against you one more time.
Place your Stop loss as soon as you enter a trade
Before you even push that buy button or sell short a currency, you should already have your cut loss point. This will save you a lot of pips if practice correctly and it will help you filter any trade in terms of its risk reward ratio. You should not in any way chase prices because of your emotion particularly the feeling of being left out. This rule will help you preserve your capital to enable you to survive longer the market.
Capital Preservation first before profit
It is common for new traders to aim for the big bucks forex trading has to offer. But the professional traders trade without consideration to the profit they will make but on how they will have to protect their investment and capital, they know that the profit will follow soon. You can only survive the market is you focus on preserving your capital, to take only trades that offers a good risk reward ratio. Forex can actually offer that stable source of income everyone dreams of if you can stay long enough in the market.
Patience will spell the difference
Money Management is the most important factor in your trading rules. You should always incorporate patience in your trading rules, it is having the market goes to you rather than you being persuaded by the market. Having a bag full of patience is vital in entering good profitable trades. A good trading strategy set up let price comes to you and not the other way around where you chase the price. It is like snipping for that profitable trade when it is on target all you have to do is pull the trigger.
Follow these simple rules when you set your trading strategy and you will have the advantage. You will have to update your strategies as new studies becomes available that is more suitable to your style but keeping your focus on these simple rules will help you formulate a truly winning trading strategy.
by: Ownen Moore