So you want to be a trader yeah? A successful one I hope. Well if so, then you want to be aware of some important rules.
These rules can be used to help reduce excessive mistakes leading to undue losses in trading. I call them the ten commandments of trading because once you can fully learn to follow them properly then making money from trading is much easier, however if you choose to ignore some of them most likely you will run into trouble.
This is by the way for the Forex market, however can be applied to all types of markets.
Forex Traders Ten Commandments
- Always look at overall trend. If the overall trend is up then simply put only look for buys, don’t trade both ways unless you are sure you are at major top like a daily resistance. It is just not worth the risk otherwise. Make sure to identify the overall trend and then stick to it until the overall trend line is fully broken..
- Always know your Risk First.
- Always know your attainable Reward.
- Keep Account draw down to less than 20%. Draw down is fine, but not at the expense of your whole account so keep it in check..
- Sell at highs ( retracements )
- Buy at lows ( retracements )
- Keep to your own personal exposure rules to limit risk in the market.
- Use a stop loss that is where you are definitely wrong.. It is always better to focus on winning trades rather than losing trades, so either hedge the bad trade ( optional advanced money management ) or cut losses when you know you are wrong.
- Lock in profit when a trade goes your way more than a 1 to 1 risk to reward.. This can be a small lock in of around 5 to 6 pips if you are going for a desired target, but either way lock it in, it is better to risk profit than to let a winning trade go into loss.. would you not agree?
- Let your winners run as far as you can handle while locking in as you go.. To lock in, simply keep adjusting your stop loss into the profit zone.. If the market is moving quickly, adjust your stop loss quickly, if the market is moving slowly then adjust it slowly.
Okay, so there you have it. It is not like rocket science or anything, it really comes down to good money management where you are sometimes willing to take a small loss. And do not worry so much, be positive, losses happen, it is the overall gain that is important.