Monday, April 29, 2013

Simple Trading Rules

If you have read and understood the introduction in Forex now, you will learn some important trading rules and we are on your way to start creating a solid trading plan.

Do not over-trade
  • Yes of course. No one should trade without having the proper means to do so. It really makes no sense as it put the trader in a disadvantaged position even before the trader begins actual trading.
  • Beginning traders may wish to use a 1/3 of your total margin only. Do the calculations. Decide if your potential reward is worth the potential risk. If not, look for another trade. 
Always use protective stops to limit losses
    • The first discipline that any trader should master is to always limit your losses.
    • A stop loss order is set to limit a trader's potential loss. The stop loss is placed below the current price (to protect a long position) or above the current price (to protect a short position).
    Diversify your portfolio
    •  Try to avoid "Loading up" in any one commodity or product. 
     Keep emotions in tact
    • Don't make trading decisions based on "Fear and Greed", as hard as this may be.
    • Make decisions away from the market - "Don't be a screen watcher" 
    • Don't let ego get in the way
    Trade in the direction of the immediate trend
    • It means you should always trade in the direction of recent price movement.  
    • Don't try to pick bottoms or tops
    Don't add to losing positions - TARGET OUT!
    • You should have specific price levels for both the target and stop
    • Don't feel bad about losing trades. They happen all the time. Just make sure you learn from your mistakes.

    Keep it simple, more complicated is not always better
    • Trade within your understanding of the markets
     Employ approximately a 3 tl reward to risk ratio
    • Don't ever risk $2 to make $1

    Always be a student and keep learning
    • An new trader, will find new ways to learn better and faster. 
    • One sure way to become a more effective trader is to simply keep learning.
    Above all, be disciplined 
    • You must remain stalwart in waiting for your "best" opportunity to enter a position, and agile enough to keep your focus on spotting the next exit signal.

    With this type of trading rules, you can confidently utilize and fine tune your trading strategy in a controlled trading environment which focuses on long term success.

    Well that's it for the guidelines. I hope you find them useful, informative and most importantly, PROFITABLE!

    For more information about trading with ICM Brokers, feel free to visit our website


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