Trading discipline is essential to be a successful forex trader. Statistics revealed that 70% of Successful forex traders lose, 15% reach breakeven and the remaining 15% make profits owing to consistent discipline. There is no shortcut to profitable trading, traders must implement proven trading strategies to their trades. Naive investors often think of doubling profits in days or weeks and fail to understand forex trading is somewhat similar to any other investment which needs patience and time.
In this article, we have discussed some golden rules that will help to carve your forex trading journey-
1. Decide upon your trading plan
A trading plan is a written set of guidelines that defines a trader’s criteria (entry, exit, money management) for every purchase. Sticking to your plan is the key to successful trading. Taking trades outside of the set plan is considered a poor strategy.
2. Ensure reasonably funded account
Cash acts as fuel to start trading. Before starting your trading journey, ensure the availability of sufficient funds because lack of liquidity can hamper your trading.
3. Treat trading like a business
In order to be successful, you must approach your trading as a part-time or full-time business and not as a job or hobby. Treat trading like a business that involves expenses, risk, losses, uncertainty and stress. Being a trader you are like a business owner so, to maximize the potential of your business, you must strategize and research,
4. Take advantage of technology
Since trading is a competitive business, it is advised to take advantage of the available technology. Technology like charting platforms, historical data, market updates via smartphones are very helpful in monitoring and analyzing the market.
5. Manage your trading capital
The basic feature of the forex market is high volatility. After generating profitable trades, be sure to manage those profits. Hedge your exposure by using stop-loss and limit orders. Keep control of your capital at all times. It involves not taking unnecessary risks and doing everything you can do to protect your capital.
6. Develop a sound trading methodology
Take out sufficient time to develop a methodology based on facts to succeed in the forex market. It is important to select a methodology and implement it several times in different time frames and markets to measure its success rate.
7. Measure the risk-to-reward ratio and set your limits
Set stop loss and decide upon the line where you would wish to exit the market. Stop loss is basically setting a risk amount that a trader is willing to accept. Stop loss helps manage the risk and protects the potential profits by getting you out of the market at the price you set.
8. Know when to stop trading
You should stop trading because of these two reasons-
- An ineffective trading plan– There are chances of greater losses than what had been chalked out in historical testing. At this time reevaluate your trading plan, make the necessary changes and start over with a new plan.
- An ineffective trader– The trader is unable to follow the trading plan, which may be due to stress or poor habits. Such traders should take a break and return to business only after resolving the challenges and difficulties.
Understanding the significance of these trading rules and their impact will help you in establishing a viable trading business. Traders should be in discipline and patient while following these rules and increase their odds of success in a very competitive arena. These golden rules are going to be beneficial in the long run.
PFH Markets is a globally acknowledge name in currency Successful FOREX and offers competitive pricing, 24/7 customer service and helpful guides and tutorials so you have a wide range of tools to start forex trading.
