Trading in the Forex market is an art that has to be understood and cultivated along with the highly speculative nature of the market. Success stories in this arena are limited to around a mere 10% at best. There are many reasons for this and the following ten golden rules of trading will help investors to become successful Forex traders.
Rule 1: A trader should learn to discern hype from genuine trading tips. There are many schemes and advertising gimmicks that are offered to traders with get rich quick themes. These have to be avoided as trading currency has to be learned with patience.
Rule 2: Novices in the Forex market tend to concentrate on day trading and this can be riskier than other forms of trading. It is best to trade over the long term as the pace is easier to understand.
Rule 3: What matters in trading currencies is the quality of the trade and not how many trades are done. An investor who is smart will be rewarded for being correct while others who transact many trades might fail to profit from frantic trading.
Rule 4: Trading should always be done with the appropriate safeguards. Rewards and risk go hand in hand in the Forex market and having proper safeguards will allow a trader to invest more and thus earn better profits.
Rule 5: Trading should always be simple and clear as opposed to complicated systems. Complicated systems often have many weak points that are easier to break.
Rule 6: Gaining a Forex education is important to all investors in Forex currency trading. With knowledge you will be able to steer your trading in the correct path that lead to profits.
Rule 7: Never be emotional about trading. This can happen when a trader is winning or losing consecutively. If there are repeated profits the trader can get greedy and try for bigger profits. The same way a loser will panic and start trading erratically in order to recoup losses. Both these scenarios should be avoided and the way to do it is to formulate a trading plan and stick to it.
Rule 8: Diversify your portfolio to minimize losses. Never put all your eggs in one basket. The way the Forex market works is by setting off losses against profits and hence the trick is to make more profits in the longer run. With experience traders will know when to risk it all to collect bigger profits.
Rule 9: A trader has to keep in touch with market research at all levels and times. This will enable a trader to take the correct decisions with regard to market trends and trading.
Rule 10: The tenth golden rule is all about survival in a highly volatile market. A trader should always trade with only money that he can afford to lose as this will ensure that he will not be wiped out. Knowledge, discipline and patience are strengths a trader should have to a success in Forex trading.