Every trader has to learn some valuable rules one way or another, either by learning the hard way or by following some established rules of a more seasoned trader.
So I figured I’d share a few of my own, so that it can help you in your own trading. I even have to read back over my own rules periodically to ensure that I don’t violate some of them myself.
1. Don’t immediately quit your day job to trade.
Many people hate their jobs and so they want to go “trade for a living.” For starters, many people don’t have the self-discipline at first to get up every day and trade each day like a job. Secondly, it’s always easier to trade when you don’t “have to” make enough money from your trading to pay your salary plus healthcare costs, etc. So never quit your primary job when you start trading. The forex market is a 24 hour a day market. So trade when you’re off work. It’s not like the stock market where all of the trading goes on while you’re at your day job.
2. Trade small at first.
Novice traders think of “how much they can leverage” and “how much they can make.” Seasoned traders know that wins will take care of themselves. However, its losses that have to be managed. The best way to control losses is to start off by trading one lot at a time, not multiple lots.
Editor’s Note:Join the 3.5% of Americans who are truly wealthy and financially secure.
3. Never, ever add to a losing trade.
If you’re wrong in a trade, don’t make it “more wrong” by adding to it. I know, you think the trade will come back. Many trades do not, but all it takes is one bad trade like that to finish your trading career. So never add onto a losing trade, ever. Remember, markets can remain irrational longer than you can remain solvent.
4. Trade with the trend.
In order to keep the statistics on your side, you have to trade with the trend. If a currency pair is going up, look for buy signals and not short-selling signals. If a currency pair is heading lower on the chart, don’t look for buy signals. Look for short signals.
5. Buy the currencies that show the greatest strength and short the ones that show the greatest weakness
. Every year, there will be a couple of currencies that seem to be the “market leaders” or “laggards”. Buy strength and short weakness.
6. Trading runs in cycles.
You will go through winning streaks and losing streaks. Every trader has them. There are no exceptions. So “trade light” and keep money management in mind by risking a small percentage of your account balance on each trade because there will be months that you lose and sometimes quarters where this will happen. If you do it right, you can still win on the year if your money management is right. Don’t think your system doesn’t work if it doesn’t “win” every month. No one’s system does.
7. “Up” markets will be more orderly than “down” markets.
Take your position size down in “down” markets since the market’s gyrations will be more irrational at those times due to the heightened emotions of the traders.
8. Never quit.
The ones that end up becoming pros are the ones that pushed through their rough patches in trading and never quit. Quitting is a guaranteed failure. By not quitting, you still have a good shot at being a successful trader.
I’d suggest pinning these rules up somewhere around your trading station. Review them daily at first. Later on, you’ll be able to review them once a week or once a month. But for now, get rules like this engrained in your mind.
Those that violate rules like this tend to be the ones that “wipe out.. The ones that respect these rules tend to be the ones that live to fight in the markets another day and stand the chance of being a successful trader over the long haul.
Have a great holiday weekend. Thank God for our independence and may God bless our troops that protect us and allow us to keep our independence.
God bless America.
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here
to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now
© 2016 Newsmax Finance. All rights reserved.