If you are looking for ways to make more money, looking for a career change or just looking for some passive income then I bet you have come across forex trading or someone that trades the financial markets. You have probably seen them make huge profits and thought, hey I want a piece of that.
However, there are few rules that you need to follow if you are ever to be successful in the forex markets.
THE MARKET PAYS YOU TO BE DISCIPLINED
Pretty much like anything in life, if you are disciplined you will achieve success so it is no surprise this is number on my list. Discipline = Increased Profits if you can get this to stick in your head early on it will save you a lot of headaches in the future and not to mention a lot of money. Trading with discipline will put more money in your pocket and take less money out. Being disciplined is of the utmost importance, it is not something you can do every now and then if you want to be successful in the Forex market
HAVE A TRADING PLAN
Trading without a trading plan is financial suicide. If you don’t know where you are going how can you ever get to your destination? By having a trading plan you eliminate so many elements of risk to your account. Having a trading plan where you trade with confluence is the best way to grow your account.
LOWER YOUR TRADE SIZE WHEN YOU’RE TRADING LIKE A FOOL
No one likes to take a loss and the best thing to do when you are trading badly is to take a break. If you are not going to walk away and take a break then why continue to lose on one to five lots per trade when you could save yourself a lot of money by lowering your trade size down to a smaller lot on your next few trades? If I have two losing trades in a row, I always lower my trade size down to one lot. Once you regain your momentum or you have made back what you have lost, you can then put your lot size back up to what you had before.
NEVER TURN A WINNER INTO A LOSER
This rule I used to continually violate when I first started trading. It should be our goal to try harder not to violate this rule in the future. The reason we violate this rule is purely down to greed. We get overconfident after a few profitable trades, then fuelled by greed we do not follow our trading plan. The trade goes against you and you decide to keep the trade on instead of letting it hit your SL which if done correctly should have been in profit or worst case break even.
There is no need to be greedy. Stay focused on your trading plan and your account management. You will make many more trades throughout the session or week, with the markets being open 24/5. One trade should never exceed more than 2-5% of your account balance.
If you want to have any sort of future in trading you need to keep your risk management in check. I recommend a ratio of 1:3 minimum for day trading. Swing trading is a whole different ball game. With the right entry, you could easily double your account. By not looking for trades with good risk management you run the risk of chasing trades which leads to mistakes and unnecessary loses. Start a journal for your trades and keep a trade log with profit and loss ratio.
DONT BE BILLY BIG BOLLOCKS
Learn to accept your comfort zone and trade according to your account size. There are many traders on social media that claim to professional traders even though they are in their early 20’s who actually just trade with demo accounts. They have no emotional tie to the trade. Then you have the good traders that make an absolute killing who actually show withdrawals from their trading accounts. It is hard not to think of those big profits and withdrawals when you are only trading a $500 account. Stay within your comfort zone and do not over leverage your account.
Never put yourself in the precarious position of losing more money than you can afford. The worst feeling in the world is wanting to trade and not being able to do so because the equity in your account is too low and your brokerage firm will not allow you to continue unless you submit more funds.
LEARN TO TAKE A LOSS
You will get it wrong at times and you will have to learn to take a loss. If the trade has gone against you and hunting your stop loss down like a lion on a gazelle let it go or just close the trade manually. Account preservation will help you come back to trade another day.
It’s amazing how accurate your gut is as a market indicator. If your gut is telling you that the trade is no good then it’s probably no good and time to drop it like its hot.
When I was a new and undisciplined trader, I cannot tell you how many times that I prayed the market would turn. I would always adjust my SL and end up taking a bigger loss than I needed too.
TRADE WITH A STOP LOSS. NEVER TAKE A BIG LOSS
Big losses do not just hurt your account they hurt your confidence too, your psychological and emotional standpoint will be shattered for future trades. You can have 20 small wins and 1 big loss that smashes all those profits. It takes a long time to get your confidence back after taking a big loss on a trade. Follow your trading plan and learn to get out of your losing trades quickly. It will save you a lot of trading capital and will make you a much better trader.
MAKE THE SAME TYPE OF TRADES OVER AND OVER AGAIN.
Become a bricklayer and by that I mean, a bricklayer shows up for work every day of his working life and executes with the same methodology, brick by brick by brick.
The same consistency applies to traders, as well
MAKE A LITTLE BIT EVERY DAY – THE POWER OF COMPOUNDING.
It is amazing how quickly your trading account will build up over time just by making a little bit every day. The power of compounding on your trading account can turn a $1000 account into $1.2 million in 1 year making 3% a day.
ALL TRADERS ARE CREATED EQUAL
We all start out the day the same. We all start out at zero. Once the bell rings and trading begins, it.s how we conduct ourselves from a behavioral standpoint that will dictate whether or not we will make money on the day.