When I say 'Rules of Trading', It is something which I am sharing with you to be followed so that you will suffer minimum Losses & earn maximum Profits. One thing to be kept in mind always is- No setup or Trading System or Signals or Robot or antything that sort of , is 100% correct & always makes you a profit. Market is Market & there are infinite number of factors that influence the market. It is practically impossible for anyone to keep track of those & predict the behaviour of market correctly every time. Not even possible for Big-wig Analysts. What basically we are trying to do is setting up the odds in our favor to become successful in every trade.
- Enter/Exit Technically based on Fundamentals.
Slightly confusing..but lemme explain. The approach to choose Tehnical analysis or Fundamental analysis is a million dollar question. Follow different approach. mark your entries and exits technically but choose the direction of trading (Uptrend or Downtrend) on Fundamentals.. This is because Fundamentals set up the patterns which last for days,months and may be years. However technicals will give you the signals, resistance / support levels & allow you to design your entries and exits, depending on your risk factors. Both Analysis types are important and must be taken into consideration. whereas, if you are reading time frames lesser than 1 hour, then you may stick to mostly technicals but remember there is lot of noise, false signals, sudden reverses over there.
- Never give away winning pips.
When you place a trade, sometimes it goes smooth as you wanted intitially, but after sometime, it reverses and you suffer loss, and it can be heavy loss if there is Poor Money Management. This scenerio happens to most of the new traders and it really makes feel sad to see those winning pips turning to losses. So you need to remeber one simple thing- always protect your profits. If you are trading lower time frames, then keep an eye on your trades. If you start losing pips, exit the trade manually. Say,for scalpers,If you gain 10 pips, lock it. On lower TFs, when you win ten times 10 pips, it comes out to be 10x10=100 pips. I personally recommend to trade atleast 1 hour time frame where you can define your TP & SL levels more correctly. Forex market moves very fast, so lower time frames require more attention.
Capital that you use for trading should be the Risk capital that simply means - you don't need that money. But since it is your hard-earned money you have invested to make it BIG. SO always learn to protect your Profits.There are certain ways to do this. One of the way is opening a trade with two lots. If you want to open one mini lot, then split it to two, 5 micro lots (1 mini lot = 10 micro lots=5+5). Now, once your TP is reached , encash your profits for one lot and move your SL of another lot to BE(break-even) point & let the trade flow. This is a bonus. Even if this second trade SL is hit, you ealready have encashed profits. Another method could be using Trailing stop. It will move your SL to a level predetermined by you once that many pips are captured. It is about safeguarding the profits & minimising losses.Successful Trading means the protecting winning pips, no matter how small or big number of pips & minimising losses.
- Timing
Suppose you decide to go Long on certain pair. All your technicals & Fundamentals signals pointing towards pair to rise. You place a trade & watch. Alas! instead of going up, pair starts moving down. You couldn't believe your eyes. It is moving towards the SL. Atlast your SL at 40 pips gets hit. You suffer loss. Later you find that the same pair is rising again & it climbs to a high of 100 pips but...without you. was that really you? This happens to many traders. This happens because of lot of movements in currency markets that we are unaware of. Just remember few simple tips. Always believe your eyes. See what they are showing you & not what you want them to see. The analysis in above example was correctly made by a trader but he was wrong in timing of placing the trade. Let all your indicators give you right signal. Don't just speculate & enter. Patience is virtue in Forex. Entering correctly but too early is Wrong entry. Maintaining proper timing in placing trades will most times earn you good profits.
- Trade Responsibly
I observed so many people, when they decide to trade, they think it is easy money and anybody can do it. Just need to buy some Robot or so called '100% successful trading system' and they are set to earn Billions. Is it really so easy? Then why are these systems selling in the market for money. Please use that little but vey profound thing sitting inside your head. Trade responsibly!! Take your time or rather I would say invest your time in knowing, understanding the market basics to get paid later. More you invest time, more you will earn money. Time is money!When you are playing against market to win, they say you need to use risk to reward ratio of 1:2 or 1:1.5 & so on. But certain times it happens that pair reverses just before hitting your TP of 100 pips and moves all the way to hit your SL of 50 pips. Winning trade turns to Loser. Again I would say, don't just depend on the technicals or maths involved. Pay attention to what market is trying to say. Trust your eyes, respect the market sentiment and you are all set to become a successful trader. I prefer to use risk to reward ratio depending on what market is saying.
- Control Risk
In Trading, you don't have control on anything except one thing & that is your Risk. It is very essential though. Always always use Stop loss for any trade you place. It will keep you going in the long run. Profits are unpredictable in Forex. If you are sure and confident, you can move your TP further if trading with only one lot to gain profit but never ever move your SL. While trading, we come across many emotions and tend to make wrong decisions. Therefore always decide on SL,TP levels before placing a trade. Your strategy for any trade should be designed beforehand. You should take into account every possibility of that trade & your action on it. When we win, it is our Luck but when we lose, it is our mistake.
- Behavior of Currency
In order to trade winning side always, study the charts. Take any currency pair & study how that pair has performed for last one to two years. Which time of the day, it shows more volatility, when were the trends happened, what was the effect of News events on that pair, what is the current trend going on. This information is easily available on any trading platform. Understanding the behavior of any currency pair is very important. It doesn't promise the future behavior but it is always good to know the basics.
When you decide on your Trading system, stick to it. Do lot of back testing, identify the winning past trades as per signals given by your system. Do extensive Demo trading with the system.
All these rules will keep you going if followed and eventually turn you into Successful Trader. Bookmark this page, Read these rules daily once till it becomes your second nature. Happy Trading....All the Best....stay connected...
