The Golden Rules of Forex Trading

Before entering into any transaction, you should know your pain threshold. The best way is to make sure that your losses are controlled and that you will not enter a trade for emotional reasons. Investing in Forex trading is difficult; there are many more losses than successful transactions. Much more often the cause of failed…

Before entering into any transaction, you should know your pain threshold. The best way is to make sure that your losses are controlled and that you will not enter a trade for emotional reasons. Investing in Forex trading is difficult; there are many more losses than successful transactions. Much more often the cause of failed transactions is that investors have bad ideas as they approach to the market is mostly based on emotions. Common mistakes often include either ending their transactions too early or allowing their losses deepen too much. Here is where risk management takes its place.

Risk Management

The most rational moment for risk planning is the time before the conclusion of the transaction, when our mind is clear and our decisions are not subject to emotions. On the other hand, if a transaction is in progress, you want to maintain it until the prospects for profiting are still there. Unfortunately, this is not always the case. You need to know what the worst-case scenario for the transaction is and place the stop loss at the appropriate level. Again, we emphasize that the risk must be provided before concluding the transaction and you have to stick to the parameters that you set for the stop loss. Do not let your emotions force you to change your stop loss prematurely, as in most cases you will suffer the consequences.

The risk in each transaction is always there. No matter how careful you are, you can never be sure of the outcome aspecially for beginners it's more about guessing. When investing in the Forex nothing is certain. There are too many external factors that can change the movement of the exchange rate.

Sometimes it can change the foundations, and in another case, there are just different factors such as barriers, daily fluctuations in the exchange rate, the central bank pursuing purchases, etc. Make sure that you are prepared for this uncertainty by setting your stop loss beforehand.

Protecting your Profits

On the other hand, the level of profit is unknown. When the exchange rate changes, the traffic can be large or small. Money Managing is in this case extremely important. Referring to our principle of “protect profits”, we recommend trading with multiple flights. This can be done using a mini account. This way you can protect the profits of the first lot and move your stop loss to break even in the second flight.

Make the trend your friend

The Forex market is the market of trends. These trends can last for days, weeks or even months. This is the main reason why most of the gurus in the Forex market focus exclusively on trends. They believe that every trend movement they will catch can compensate for any loss of price spikes appearing within the Forex market.

Finally we need to remember that half of the trade is a strategy and the second is undetected part of managing your money. Even if you have lost on some transactions, you must understand what exactly went wrong and make sure to learn from your mistakes. However, if the failure is in line with the strategy, which in the past has been oftentimes more successful, then just accept the loss. The key is to make your overall approach to investments make sense, but at the same time do not bother yourself so much for every individual transaction. Once you have mastered this skill, emotion should not bother you, no matter whether you trade $ 1,000 or $ 100,000