What most professional traders have in common is the discipline to follow some of the basic forex trading rules.
Let us now see what these rules are. The rules are listed as follows −
For an amateur trader, it is always better to start slow and with less money. Do not expect or think that your first trade will be a jackpot. It is common that your first trade will not work as planned. If you lose too much money, you will be out of the game soon and if you make too much (then you anticipated) money, then because of your over-confidence, you will do over-trading and loose most of what you gain.
Limit your losses
You should have an exit plan before you enter any trade. You should have strict stop loss in case trade is not going in your favour. If your trade is with the trend, you should readjust your stop losses and hold onto your profit. In order to keep these nightmares (your losses) from occurring, a trader should follow strict stop loss and exit the trade in case of losing trades before they turn into disasters.
Hold on to your profits
Many traders have no problem cutting losses but they also insist on exiting trades at the first sign of profits. However, they eventually see that their small profits could turn huge if they hold onto their position for little longer. The strategy here should be – “cut your losses and hold onto your gains”.
A good trading strategy is required. However, money management is also very important. Your trade risk should not be more than 2% of your account in each trade.
Listen to the charts (technical indicators)
Everything is reflected in the price and volume when it comes to technical analysis. Master the skill of understanding different indicators and use it.