Have you been eager to get the detailed answer to the question; ‘what are the golden rules of forex trading? Forex trading is more like every other business where you need certain rules to guide your business to success.
Many traders utilize spread betting as a means of diversification, complementing their existing investment portfolios and hedging against potential losses. I have been trading forex for years, and my first 3 years were of losses.
I went from one strategy to the other looking for the holy grail trading strategy. But the fact is, the holy grail strategy doesn’t exist.
The forex market is a physiology market that tends to pull your emotions as a retail trader. We are merely retail traders who have zero power in the market, making a pip is uncertain because we can’t move the market.
However, before you start trading in the foreign exchange market, you need to have trading rules that suit your risk personality. In this guide, I have piled up some golden rules of forex trading that can help you succeed in the market.
Let’s get started…
The Golden Rules Of Forex Trading
The golden rules of forex trading are beyond our trading strategy, and retail traders need to understand that there are certain processes to trust and follow if they want to be successful traders. However, understanding the market is the first golden rule to succeed in forex trading, you can’t make a pip If you don’t understand how it works. Other golden rules are to trade with the money you can afford to lose, trade with a regulated and Licensed broker, have a trading plan, and trade your plan, do not risk more than 2% of your capital, don’t trade with emotions, and be willing to learn.
Understand The Forex Market
The first golden rule of Forex trading is that you need to understand the forex market.
This is because once you understand the market, there are higher chances of you finding the right trading strategies for you.
You can also get familiar with technical and fundamental analysis of the market, which can help you spot trading setups and make the best out of them.
The Forex market is volatile and risky thus, it is important to understand it if you want to be a successful forex trader.
Trade With The Money You Can Afford To Lose
The second golden rule of Forex trading is that you should trade with the money you can afford to lose.
You must keep in mind that you are not guaranteed to make money when executing trades.
Thus, you must risk only that amount that you feel like losing.
This should be the case even when you are using a demo account while learning to trade.
You can use the demo account to test different trading strategies and get a hang of the market.
Since Forex trading is an extremely high-risk investment, you should risk only the money that you can afford to lose without feeling anxious or stressed.
Trade With A Regulated And Licensed Broker
The third golden rule of Forex trading is that you should trade with a regulated and licensed broker.
A regulated and licensed broker will help you secure your trading account.
Many new traders try to trade with unlicensed and unregulated brokers.
This is a big mistake, and you should avoid them no matter how sweet their offers are.
These brokers are not reliable, and you won’t get any help or assistance in case you are scammed or have any issues with the trading process.
Moreover, you won’t be able to report these brokers to any authorities and get your funds back.
Thus, you must trade only with a regulated and licensed broker.
Have A Trading plan And Trade Your Plan
The fourth golden rule of Forex trading is that you should have a trading plan, and trade your plan.
This is extremely important as it would help you stay disciplined while trading.
Your trade plan needs to have all the details of the strategies you would be using while trading.
You need to know exactly how much to trade, which currencies you will be trading in, and what the risk-to-reward ratio is in each trade you will be making.
Having a trading plan would ensure that you are disciplined and are not deviating from your strategy.
It would also help you stick to your risk management plan and ensure that you don’t take any unnecessary risks.
Do Not Risk More Than 2% Of Your Capital
The fifth golden rule of Forex trading is that you should not risk more than 2% of your capital at one time.
This is an important rule that traders should follow.
This percentage of the capital that you should risk while trading would depend on various factors like your trading strategy, account type, leverage used, stop loss and take profits.
However, you should be aware that the more you risk, the higher your chances of losing money are.
You should never risk more than 2% of your capital for any trade set up no matter how confident you are in your setup as it would help you secure your capital and give you a fair chance of winning.
Don’t Trade With Emotions
The sixth golden rule of Forex trading is that you should not trade with emotions.
This is one of the most important rules when it comes to trading.
Your emotions can affect your trading decisions and make you take irrational trading decisions.
This can be very dangerous in the Forex market, which is full of uncertainty.
You should keep your emotions under control and trade with a clear head.
You should be rational and disciplined during all your trading hours and keep your emotions out of the picture.
You mustn’t trade with emotions.
This way, you will not only be able to stay in the game for a long period, but you will also be able to make better trading decisions.
Be Willing To Learn
The seventh golden rule of Forex trading is that you should be willing to learn.
You should be open to learning from your mistakes and the experiences of other traders.
It is important that you read about successful trading strategies, know about the market and how it works, and get a fair idea about the psychology of trading.
This would help you become a better trader, avoid common mistakes, and make smarter trading decisions.
Apart from reading about trading strategies, you should also get in touch with other traders.
This can help you learn a lot about trading, and you would be able to avoid a lot of mistakes that people usually make when starting.
This would give you a fair chance of being a successful forex trader in the long run.
The forex market is the world’s largest and most liquid financial market.
Trading in this market can be extremely profitable, but it also has the potential to be extremely risky.
This is why it’s important to follow these golden rules of forex trading if you want to succeed in the forex market.
With these rules, you can start trading forex with confidence and know that you’re taking all of the right steps to be successful.