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Forex Trading Strategies: 4 Golden Rules For Both Seasoned And Rookie Foreign Exchange Traders
When you have read some trading books or attended a few online currency trading forums, you can quickly realize that there are virtually as many different forex trading methods as there are traders. Traders have their own methods; but more than that, in currency trading there are several different strategies of making money.
So there is not one top forex strategy that you have to stick to profit from forex trading. On the other hand, there are some helpful hints that apply to the way in which you approach your trading and these are true for just about anybody. These are the golden rules of trading.
1. Follow The Trends
Most foreign exchange trading methods and systems focus on identifying trends and there is adequate reason for that. Whether the trend shows a rise or in a fall, get in to go long or short as appropriate and do not go against it. Bucking the trend will see you losing money rapidly.
2. Protect Your Funds
Risking too much on one trade has been the failure of many promising trader. Never bet a lot of money on a single trade, however strong your instincts may be that this one cannot go wrong. Any of them go wrong.
So how much do you risk? It depends on your strategy and how much it concerns you if you lose all of your funds, but never more than 5% of your balance. 2% per trade is a safer option.
Some traders keep the percentage as their capital grows, so that they gradually bet more in real terms on each trade. That is up to you but consider carefully before you do this. When you have more cash in your account, you will certainly be more depressed if it is wiped out, so you may want to maintain the same position size (reducing your percentage risk) as your capital grows increase.
3. Set Goals For Each Trade
Have a precise profit target for every trade, so that before you enter, you have already decided when you want to take the profit and close. Do not get greedy and try to stay in there for more and more.
In the same way, if it turns bad, do not try to hold on in the hope that the trend will reverse back in your favor. Cut your losses and get out. Using stop losses to do this mechanically is a very wise method.
4. Don't Rely Only On Your Own Perception
Why not? Because quite probably you are not unbiased. Let the experts guide you, but always make your own due diligence. The best way is using forex signals. There are many forex signal providers available on the internet, but some of them are scammers. Always check out the track record, as only accurate forex signals will earn you profit, not the losers!
Those are the first four golden rules of currency trading: the tips and hints that can help you develop winning forex trading strategies.
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