7 Do's and Don'ts For Any Forex Trader

By Victor Romain, for forex-awards.com

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Trading is a business of statistics, NOT certainties

Many experienced and beginner traders (more than you would imagine) don’t get the above. They are chasing the price in attempt to not miss a single pip of the move. Thus, not using confirmations for their entries. In other words, they are simply ignoring the rules of the strategy just because this one looks like a good setup, so I will jump in a bit earlier to gain a bit more. This is when price doesn’t do what you expect it to do.

This is a subject that concerns many traders. See (below) the most important 7 Do’s and Don’ts Any Forex Trader Should Know.

7 Forex Trading “Do’s”

• A new forex trader who is all set to begin trading in the markets should be ready with a trading plan. The pillars of successful forex lie with sound knowledge and understanding of the entire Foreign Exchange Trade Lifecycle.
• In order to give a smooth start to their trade business, one should keep in mind the present monetary market scenario and study the dynamics and conduct basic research related to forex trade.
• A new trader should always begin his trade at a time when the market shows a progressively growing or down
• Prior to beginning a currency trade, he should always keep in mind the gain and loss ratio.
• Having a sound knowledge on the Fibonacci Analysis will help a trader to choose the best time of his entry or exit for starting a trade as it enables them to foresee the market fluctuations.
• A detailed technical and fundamental study of the current trading patterns by using charts, continuation patterns or trend reversal will be beneficial for a new forex trader.
• Use of intelligent trading robots will help them to achieve phenomenal success.

7 Forex Trading “Don’ts”

1. Don’t ever revenge the market after a losing trade. Ever.

This is not playing a video game where you can revenge when things don’t go as you wanted. There are no cheats. There is no restart. This is your money we are talking about.

You go nuts and angry? No problem – the market will calm you down by collecting as much as you are willing to lose. If you feel irritated step away. Go for a walk, go to the gym do a few push ups. DO NOT trade based on emotions.

If you are still not getting it let me make the picture more clearer for you. You are on the ring fighting Tyson. He throws a few punches in your face (loss). Not so strong though, Mike knows this is a friendly sparing, so you are still conscious (risk-management).

Now if you go mad and start screaming at him, and if you try to revenge for the punches from before WITHOUT following what your trainer told you to, namely to keep your guard up and don’t stop moving, what do you think would happen? You will be knocked out in a blink of an eye.

2.  Don’t take impulsive trades

Say that you are watching the news. You hear something about rate increase and you immediately open a trade. Another example. You read your favourite blog

This is not how it works. Don’t do it. Leave the impulsive decisions for the casino. The decisions that you take will affect your wallet and bank account. Patience is probably one of the hardest (if not the hardest) skills every trader must learn. It is definitely in the top 3 qualities you must have. If there are no good setups for a week, don’t trade. It is better to be at break-even than in negative. Don’t force the market because you can’t.

3. Don’t be greedy.

If you must absolutely, at any cost, chase the move till its last pip go ahead and do it. Call me in 3 weeks and tell me how you are doing.

Don’t be that guy, don’t be that trader. First of all, apply the principle of breaking even your trades once you are in positive territory. It is a great way to risk the free of your existing trade and let it run. Psychologically it will help you to hold your positions a lot longer and as much as needed rather than having the possibility to lose on a trade that was a winner.

The next step is not to be greedy. If there is support or resistance level 5 pips before your target put your target there. Put it even a few pips before the S/R level. Make sure you do everything you can, to turn your trade into a winner. 142 pips profit is the same as 148 pips of profits BUT it is not the same as -70 pips loss.

4. Don’t have unrealistic expectations

Trading is a business of statistics, not certainties.

You will have winners and you will have losers. This is the reality. If you expect to have winning trades only, trading is not for you. Trading is about finding the balance between winning and losing in a way that we make money after 100 trades.

Don’t expect to become a millionaire in 6 months if you have started with 5k account. Don’t even expect to have made 100k. Trading the markets is like going to the gym. It requires a lot of patience and consistency. You can’t cheat.

Even if you have the money to do a liposuction to lose weight, you will not be fat. That’s fine but you are not going to be ripped off either. You see where I’m going with this? There is no other way around besides doing it the right way – training, right food, rest. No matter who you are or how rich you are and how many personal trainers you hire. There is only 1 person in the world who can transfer your body – you.

Greed

If you want to make money trading the markets put the effort, work hard and one day it will happen. Your future is in your hands, just don’t chase the unrealistic dreams that will leave you with empty pockets. There are enough dream sellers out there who are ready to take your money,

5. Don’t use huge leverage                                                                                                

Leverage in simple words means borrowed money. Money that is not yours. This business has been designed and reshaped over the years many times. Some changes were for good, some for bad. Being able to use such huge leverages that brokers offer at the moment is double edged-sword. Leverage in the hands of an experienced trader could be a weapon of mass destruction. However, if you give a kid to play with a gun it won’t be such a good idea is it?

Don’t be the kid with the gun. Educate yourself. Know your right, responsibilities, limits and margins. If you fail to do so, your broker will be very very happy with you. They will even give you bonuses on your next deposit.

6.  Don’t trade the rumours.

This one is very close to #2 – don’t take impulsive trades. Rumours could be dangerous if they reach the wrong ears. Don’t jump into a trade just because:

The list could go on and on but i believe you got my point. There is nothing wrong to keep yourself posted on news and new trends. Just stick to your plan and strategy that’s all. If you wonder why here is an example:

Trader Quentin sells 1 lot EURUSD at price 1.5000. He announces that on twitter stating that the euro is expected to drop. Nothing more. Now trader Tarantino follows trader Quentin on twitter and he sees the tweet. He knows trader Quentin is a pro analyst and he trusts his judgment so Tarantino opens a sell as well. He puts a stop loss of 30 pips and target of 60 pips based on his own analysis.

A few hours later Tarantino’s trade hits the stop loss and he realizes a loss. On the next day trader Tarantino wakes up to see that the price is at 1.4000 level. 100 pips drop! His friend Quentin has realized a hefty profit already. Why? Because Quentin used another strategy. He has his stop loss set at 1.5050.

This is how the rumour can be profitable for those who start it and actually know what is going on and  unprofitable for those who blindly follow random statements from here and there.

7. Stop system hopping

Bar hopping is something that I certainly loved before I became a father of two. I’m sure you love it too! System hopping on the other hand is something that will blow up your account. Stop chasing dreams. It is not the system or strategy or method, it is you! Chances are you are the one that doesn’t make it work as it is supposed to.

Every system has its own character. It is like a pet. Your dog doesn’t talk but in order to learn how to communicate with him or her, it takes time. You adjust to each other. Your dog loves you. It is your best friend. Just give it time to adjust to your home. To create a habit of going to the toilet outside. This is how you make it work – with patience.

Same is with your trading strategy. Give it time. See how it works. Get under its skin. Practice on demo, slowly switch to live. You will start noticing interesting facts that you didn’t before. It is like reading a book for the first time. Second read is completely different from the first one, so is the third one.

Just try to stick to one strategy for at least 1 month. Four trading weeks. That’s all.