Foreign Exchange Trading Strategies: 4 Golden Rules For Both Professional And Inexperienced Currency Traders
by Chris on February 15, 2010
When you have read some trading books or attended numerous online forex trading forums, you will quickly comprehend that there are practically as many different currency trading methods as there are traders. Traders have their own techniques; but more than that, in forex trading there are numerous different ways of earning money.
So there is not one top forex trading strategy that you have to apply to make money from currency trading. However, there are a few rules that apply to the way in which you approach your trading and these are valid for just about anybody. These are the golden rules of trading.
1. Follow The Trends
Most foreign exchange trading methods and systems concentrate on determining trends and there is good reason for that. Whether the trend is in a rise or in a fall, get in to go long or short as adequate and do not go against it. Bucking the trend will see you losing money rapidly.
2. Preserve Your Funds
Betting too much on one transaction has been the downfall of many newbie trader. Never risk a lot of money on any single trade, however strong your instincts may be that this one cannot go wrong. Any of them go wrong.
So how much should you risk? It depends on your system and how much it matters to you if you lose all of your capital, but never more than 5% of your balance. 2% per position is a safer option.
Some traders keep the position size as their balance grows, so that they gradually risk more in real terms on every trade. That is up to you but consider very carefully before you do this. When you have more cash in your account, you will certainly be more discouraged if it is lost, so you might want to keep the same position size (decreasing your percentage risk) as your capital grows increase.
3. Set Goals For Every Trade
Have a precise profit target for every trade, so that sooner than you enter, you have already made the decision when you will take the profit and close. Do not be greedy and try to stay in there for more and more.
In the same way, if it turns bad, do not try to hang on in the hope that the trend will reverse back in your favor. Cut your losses and exit. Applying stop losses to do this automatically is a very recommended strategy.
4. Don't Rely Entirely On Your Own Perception
Why not? Because quite certainly you are not objective. Let the pros help you, but always make your own homework. The best way is using forex signals. There are many forex signal providers available on the internet, but some of them are scammers. Always look at the track record, as only accurate forex signals will earn you profit, not the losers!
Those are the first four most important rules of forex trading: the suggestions that can help you create winning forex trading systems.
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