1. Accept the possibility of losing your funds. Every beginner trader should understand that no one is insured against losses in the foreign exchange (Forex) market. The basic rule in currency trading is that the profits should be larger than losses.
2. Begin trading only with a clearly defined plan. When starting to trade, you should determine how much of your own money you are willing to risk and how much profit you expect. This will be your risk-reward ratio. Successful traders never enter a trade without a clear understanding of their goal.
3. Do not be afraid of the foreign exchange market. Many novice traders are overly concerned about the uncertainty and risks in the Forex market. For those who can overcome the fear and accept all the advice of experienced traders, Forex will offer truly unlimited opportunities in terms of increasing the capital.
4. Responsibility for the decisions made. Successful traders never give up personal responsibility. You can take into account any advice of experienced traders, but all responsibility for the transactions, regardless of their result, will rest solely with you.
5. Don’t let greed control you. When trades start to become profitable, traders often forget about the previously set goals, hoping for the further increase of profit. However, the market is highly volatile and trends can end quickly. As soon as the target price is reached, immediately close the trade in profit or at least move your stop-loss to breakeven.
6. Don’t fall for illusion. If the open position is losing, then do not stay in the market in hope that the trend will reverse in the direction you want. Close losing trades and immediately leave the market.
7. Turn off emotions. The main reason for losses is often excessive emotionality and unwillingness to listen to advice. Forex requires a complete shutdown of emotions when making trades. Follow your plan steadily and don’t forget to put stop-losses.
8. Trend is your friend. Trade in the direction of the trend and your profits will grow.
9. Take your time. Novice traders often open several trades and then are unable to follow them. In Forex, you can make a profit both when the currency price rises and falls. You can successfully earn money trading just one pair of currencies. Therefore, focus on one currency pair first, and master the rest gradually.
10. Remember to place stop-loss orders. Incorrect money management is a common cause of losses. Be sure to use stop-loss orders to prevent huge losses.
11. Trading system. Each trader has his own trading system, which he adapts specifically for himself. Some traders prefer the day trading system, while others are attracted to longer periods. The main thing is not to deviate from the planned trading plan and pay attention to the advice of more experienced traders. Several unsuccessful trades do not always indicate that your trading strategy is losing money.
12. Taking profits. A common mistake of novice traders is closing of profitable positions too early. Don’t deviate from your intended trading plan. This will keep you from losing potential profits.
13. Don’t turn profitable positions into unprofitable ones. Watch the market movement carefully. Once positive values are reached, set your stop at the market entry level. This will help protect your investment. Then move your stop following the trend to keep the positions in positive territory for you.
14. Frequent entries. There is nothing wrong with frequent market entries, but if you do it wrong, then no advice will help and such trading will lead you to bankruptcy. The bad strategy is that when a position is unprofitable, a trader increases its size by additional deals, assuming that the market will return to its previous state and all orders will be closed with a profit. However, if the price moves far from the previous level, the losses will be even more tangible. So it’s better to just “buy and hold” one trade than try to recover your investment.
15. Pre-planning. Do not enter the Forex market just because of a sharp rise or fall in price. Plan in advance how you will trade. Have a clear understanding of the entry point, profit taking levels and where to put stop-losses.
16. Don’t lose capital. You need to be able to keep the money you earn. Close unprofitable positions in time and hold profitable ones up to the pre-planned level.
17. Momentum and trend. Novice traders often don’t even know that momentum is growing with the emergence of a new trend. Newly joining traders create strong momentum when, as the trend rises, they increase the total mass of open orders in the market. Trade when momentum is working in your favor. With the right approach, it will push your trades in the right direction and you will reach the take profit point even faster than you expected.
18. Don’t spend a lot of time on losing positions. If you notice that an open position is unprofitable and (according to experienced traders) it is unlikely to change its direction, the best decision would be to close it and minimize losses. In the foreign exchange market, there will be many opportunities to open profitable deals, so it is not advisable to waste time on unprofitable positions. By following the above tips from experienced Forex traders, you will quickly see an improvement of your performance when trading in foreign exchange market.