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How To Make Money On The Foreign Exchange: 6 Most Important Rules


Just as there are rules and guidelines for currency trading strategies when you are learning how to earn money on the foreign exchange market, there are also guidelines for handling the personal elements and traits that hamper our success. Here are 6 golden rules for dealing with ourselves so that we can move smoothly from shy newbie to consistently profitable currency trader.

1. Keep Cool

Seasoned traders do not allow their trading be influenced by their emotions or their emotions depend on their trading. They do not risk more because they are feeling like winning, they do not hesitate when the signs are right, or get out of a trade too soon out of fear. Identically, they are unlikely to celebrate a gain, nor will they get angry, shout or kick the dog when they lose.

An individual who is influenced by his or her emotions will not make it as a currency market trader. Self discipline can be learned but make sure that you have fully mastered your emotions on a simulation account before you think of going live. If you are still taking unacceptably high risks you are not ready for real trading.

2. Think For Yourself

Different traders have various techniques. This means there is limited value in getting guidance from anybody else. Actually, unless you know that the person follows the same strategy and techniques, the advice is probably worthless to you.

Do not copy somebody else's system just because they seem to be earning money with it. Do your own homework and analyze everything that you are told. Even then, consider carefully before dumping the system that you have chosen before. There can be factors that you have not taken into account. Something that works for somebody else will not consequently work for you.

3. Keep Records

Keep a spreadsheet detailing each transaction so that you can see statistics your own trading activity. You do not inevitably need to use it to modify anything, but refer to it often to remind yourself of the many small trades that add up to success or failure.

What should you record? At a minimum, the currency cross, your position and the opening and closing prices. Still, these plain facts would be much more explanatory if you can also add why you took the position. Did it match the criteria of your system? What made you believe that the trend would go your way? When you look back you will have a much better perspective of why your trading history is going well or not so well.

4. If In Doubt, Stay Out

Do not open a trade if you are vacillating or uncertain about it, assuming of course that you have a reason other than fear for your reluctance. A trade can only go one way or the other, so if it is not absolutely right, it is wrong. Wait. There will be a lot of better opportunities.

5. Limit Your Trades

Do not be drawn into thinking that you must never miss an opportunity. You do not have to be on top of many various currency crosses and jump into every market regardless of what else you could be doing.

6. Don't rely entirely on your own judgement

Even if you are not a novice trader, don't think you are infallible. Find a good forex signal provider, who would cater to you reliable forex signals. Such accurate forex signals can be traded on a stand-alone basis, or used as a verification of your own trading decisions.

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