The Right Approach To Make Money On The Currency Exchange: 6 Most Significant Rules
by Chris on February 15, 2010
Just as there are rules and guidelines for currency trading systems when you are learning how to earn money on the currency market, there are also tricks for managing the human factors and traits that hamper our success. Here are six golden rules for managing ourselves so that we can move smoothly from vacillating rookie to professional foreing exchange trader.
1. Keep Cool
Successful traders do not allow their trading be dependent on their emotions or their emotions be impacted by their trading. They do not risk more because they are feeling like winning, they do not hesitate when the signs are right, or close a trade too soon out of fear. Likewise, they are unlikely to be overenthusiastic due to a gain, nor will they sulk, shout or kick the dog when they lose.
An individual who is influenced by his or her emotions will not succeed as a foreign exchange market trader. Self discipline can be learned but make sure that you have totally mastered your emotions on a demo account before you think of going live. If you are still taking uncontrolled risks you are not prepared for real trading.
2. Think For Yourself
Different traders have different techniques. This means there is limited value in getting guidance from anybody else. In fact, except you know that the person follows the same method and techniques, the advice is probably useless to you.
Do not copy somebody else's system just because they seem to be earning profits with it. Do your own research and analyze everything that you are told. Even then, consider carefully before abandoning the system that you have followed before. There can be factors that you have not taken into account. Something that works for somebody else may not necessarily work for you.
3. Keep Records
Keep a spreadsheet detailing each deal so that you can see patterns in your own trading activity. You do not inevitably have to use it to modify anything, but refer to it often to remember of the many small trades that add up to success or failure.
What should you record? At a minimum, the currency cross, your position and the opening and closing prices. But, these bare facts would be much more explanatory if you can also add why you entered the position. Did it comply with the criteria of your system? What made you assume that the trend would go your way? When you look back you will have a much better perspective of why your trading history is going well or not so well.
4. If In Doubt, Stay Out
Do not open a position if you are hesitant or uncertain about it, provided of course that you have a reason different than fear for your reluctance. A trade can only go one way or the other, so if it is not exactly right, it is wrong. Wait. There will be many better opportunities.
5. Limit Your Trades
Do not be drawn into thinking that you must never miss an opportunity. You do not have to be on top of several different currency crosses and jump into every market regardless of what else you may be doing.
6. Don't bet solely on your own judgement
Even if you are not a novice trader, don't think you are unfailing. Find a good forex signal provider, who would cater to you reliable forex signals. Such accurate forex signals can be traded on a stand-alone basis, or used as a confirmation of your own trading decisions.
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