Every Business have rules
Traders lose money in every kind of business not because they are bad at what they do, but because every business has rules that govern it, and if those rules are flouted, the consequences usually lead to failure on the part of the trader. Forex trading is just like every other kind of business where traders buy and sell commodities, and in the world of trading, whether digital or physical trading, you must adhere to certain rules if you intend to stay in the business long term. In this article, we will dive straight into the 7 Golden Rules that govern forex trading.
Before we dive in straight into the 7 Golden rules, I will like to mention that there are two main reasons why traders lose money in the Forex market, and they are: very bad trading system and neglect of trading rules.
The 7 Golden rules:
- Invest in Forex education: This is the first and most important rule that must be adhered to when venturing into Forex trading or even if you are already trading. Make sure you invest wisely and solidly into acquiring the necessary education as regards forex trading. Most traders who skip this Rule number 1 most likely leave Forex trading after a very short period because knowledge is power over everything.
- Always use a Demo account: After acquiring the necessary Forex education from experienced traders/experts, ensure that you start out your trading journey with the use of a Demo account. This cannot be overemphasized because without the actual practice of what you have learned, you cannot actually improve on what you have been taught. Demo accounts provide you with Virtual trades on real market conditions, hence you don’t actually need your real money to trade in the real markets in the meantime. Isn’t that so amazing?!! So don’t skip this rule make good use of this.
- Avoid trading software: Most traders will definitely disagree on this with me, but researches over the years have shown that trading software cannot actually outperform Humans over the long term. In fact, no trading software can guarantee you consistent profit over a long period of time, and this is simply because if such a trading software exists, why would the trader want to sell it?
- Apply Risk management: In whatever kind of trading you are involved with (stock, Forex, crypto, or commodity ). Risk management is one of the most important rules governing forex trading. If you do not manage your forex capital wisely, you will not be able to last long term in the forex market. A technique that can be used to achieve this is; risking less than 1% of your capital on every trade and also apply to stop loss on every trade to ensure that you do not lose more than 20% of your trading capital cumulatively.
- Avoid emotional trading: When real money starts exchanging hands, there are definitely bound to be emotions. During these moments when emotions get high, many wrong forex trading decisions are made, and these wrong decisions lead to losses, so before you start trading the forex market using a real account, train yourself not to be so financial attached to your trading capital and the easiest way you can achieve this feat is to trade with a capital that you can afford to lose. Yes! I said afford to lose because as a beginner, the possibility of blowing up your trading capital is higher, and you must admit the fact that Forex trading comes with losses as well as gains.
- Trade more of Technical analysis: when trading the market, a retail trader can base his/her analysis on two factors, which are fundamental and technical analysis. Fundamental analysis has to do with Economic news/activities emanating from the various world economies, and this economic news has a far-reaching effect on the Forex market in the short and long run. Also, these effects are often difficult to predict by Forex traders, especially retail forex traders. Hence it is advisable to stay off currencies been driven by economic news and focus more on currencies that are been driven by the technical analysis at the point of trading i.e., avoid trading currency pairs with existing or incoming Economic or political news attached to the currency pair.
- Make use of a very good broker: This is one rule most Forex traders overlook when deciding to start trading the financial markets with a real account. One way you can make a very good decision about the kind of broker you will use for your live account starts from the Demo accounts. Take note of the: spreads, commissions, Regulations, and ease of communication between you and the customer service of the Brokers because these factors can either make or break your trading experience in the Long run, hence, pay attention to the details of any broker you want to use for your live trading activities.
A very Good Broker does not have hidden charges, and its commissions/spreads are always very tight while they also have multiple regulations from relevant financial bodies internationally. I will recommend Icmarkets.com because they possess all the aforementioned qualities.
Finally, when you adhere to these 7 Golden rules, you will be well on your way to having and maintaining a successful and Happy Forex trading career in the long run.