Forex Trading Principles
Being a successful Forex trader takes more then just having money, time and desire.
The more you realize it, the better are your chances of making it big in this wonderful business.
Throughout the years I learned many valuable lessons that today I apply to my Forex trading.
Here are some of these lessons. I hope you don’t take them lightly, I guarantee you that these are
true gems product of trial and error (something I hope to shorten for you!).
1. Your psychological state of mind is more important than your dollars. Yes, that is correct. For example, entering a trade when
you know you should not enter it and ultimately losing money on it will cause you a financial loss which hurts but can be recovered
in the next trade or two. However, it will also cause you a psychological loss in the form of future fear and insecurity. This,
will take more than one or two trades to recover!
2. Don't ever try to pick absolute tops and bottoms. I know of traders that have an addiction with this. They always look to pick
the absolute bottom or top and ride the market on the reversal. They succeed one or twice but eventually suffer a big hit. If you
can't help it and you want to try and look for those huge turning points in the market at least use some sort of confirmation.
Don't just guess "this is the top" or "this is the bottom".
3. Remember what type of trader you are and follow the rules of that specific method of trading. For example, if you are a day
trader it would be wise to ignore the fundamental picture. It would also be wise to analyze and trade with the appropriate time
frames. Also, select a forex broker that offers tight spreads, provides good order fills and guaranteed stop losses (all important
for effective day trading). If you are a swing trader it is important you look at the much bigger picture. Sometimes fundamental
market data can come in handy (although I personally prefer to look at the technical picture alone). Learn to be patient, both in
terms of your profit target being reached and entering trades (for swing traders it can be weeks with no trade signals).
4. This one is simple but you would not believe how many traders do not follow it. In bear markets sell the markets that show most
weakness. Don’t try to outsmart the market. If the market is telling you "I am weak" don’t argue and just follow! If the market tells
you "I am strong", BUY and continue BUYING!
5. As traders we can never know what price is to "low" and what price is to "high". Don’t be afraid to join a trend. I know that
psychologically this can be difficult sometimes. You are always afraid that you will be entering the trend at it's end. This rule
is important but must not be followed blindly but rather smartly. Suppose you are day trading the EUR/USD.
You know that the average daily range of the pair is 90 or 100 pips. If your
forex trading system is telling you to go long at a point where the market has already moved 80 pips and place a profit objective of 50 pips,
would that be a smart move? Obviously not.
14 Rules for Successful Forex Trading - Part 2 >>
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